Picture: REUTERS
Picture: REUTERS

Already under pressure, the rand could be heading for more pain amid global risk-off sentiment as the US Federal Reserve continues with its strategy of gradual increases in rates, as it normalises monetary policy.

The rand weakened to R13.3962 to the dollar on Wednesday, before recovering to R13.25, despite disappointing local retail sales data.

"The picture for the moment is not looking pretty," said TreasuryOne trader Andre Botha. He ascribed the bout of weakness to portfolio outflows, although he said the reason was "not clear-cut" regarding any decoupling of the rand from other emerging market currencies.

June is expected to be an even weaker month for the rand than April, when it lost 5.42% to the dollar. It retreated a further 1.91% in May.

Some analysts disregard local factors in explaining the rand weakness, citing global factors as the main reason. However, technical charts show the current rand weakness accelerated with the release of disappointing GDP data for the first quarter earlier in June, showing a 2.2% contraction.

Compared to other emerging market currencies, the rand is not doing that badly, despite having lost 6.91% of its value against the dollar since January. The Brazilian real has lost 15% and the Turkish lira more than 20%. However, that may not be positive as the rand could still weaken in arbitrage trade, playing catch-up with other emerging market currencies.

"The rand would be at R17 to the dollar without President Cyril Ramaphosa at the helm," said Investec chief economist Annabel Bishop.

Herenya Capital Advisors trader Petri Redelinghuys said there was still real concern in the market that Ramaphosa would not live up to his promises. "The longer the currency stays above R12.80 to the dollar, the greater the potential for further weakness."