Rand dips again in volatile trade
The rand dipped again on Wednesday morning, but the quantum of the drop this time was fairly small compared with a few days ago.
But one thing was certain: the rand remained very weak against the dollar and other hard currencies in the short term.
Local politics and its implications on the broader local economy continued to hurt the rand, which acts as key driver of consumer inflation.
The direction of the local currency remained uncertain, given the potential event risks on the horizon.
Moody’s and S&P Global Ratings are scheduled to review SA’s debt rating next week, while the increasingly fractious ruling ANC will choose its new leader in December.
The rand and local bonds could be the immediate casualties if the country’s local-currency debt is downgraded to sub-investment grade, or so-called junk status.
But the downgrades also carry long-term consequences in terms of low business and consumer confidence, which puts further pressure on the economy.
The flipside of the argument is that some of the world’s leading economies appear to be in no hurry to aggressively raise interest rates, which favours higher-yielding emerging-market currencies.
EtfSA strategist and adviser Nerina Visser said last week that a possible effect of a credit downgrade was "overestimated", given that investors were still hungry for better yield.
At 9.38am‚ the rand was R14.3780 to the dollar from R14.3644‚ at R16.9784 to the euro from R16.9479‚ and at R18.9494 to the pound from R18.9112.
The euro was at $1.1808 from $1.1797.