The dollar and the rand. Picture: REUTERS, SIPHIWE SIBEKO
The dollar and the rand. Picture: REUTERS, SIPHIWE SIBEKO

The rand remained under tremendous pressure on Monday morning, although it was well off the day’s worst levels after the Turkish central bank stepped in with measures to address the meltdown in the lira, which acted as a destabilising force across global markets.

Earlier in the Asian session, the rand plunged by the most against the dollar in nearly 10 years, raising the prospect of much higher inflation, which could force the Reserve Bank to increase interest rates.

Living up to its character as the most volatile currency, the rand plunged as much as 10% to cross R15/$ for the first time into two years. This marked the biggest one-day fall since October 2008, at the height of the global financial crisis.

Just more than two weeks ago, the rand changed hands to the dollar at R13.09 before reversing course on a combination of factors, including concerns about the land reform process.

Other emerging-market currencies were under pressure, too, amid heightened global risk aversion.

But in an attempt to stop the bleeding in the value of the lira, the Turkish central bank announced a series of measures, which reportedly included ensuring banks had enough liquidity.

The Turkish lira, which is the worst-performing currency in 2018, turned slightly positive following the announcement of the crisis management measures.

"The rand has recovered from its worst levels but remains very vulnerable to further EM [emerging-market] shocks. The only certainty I can give you is heightened volatility for the foreseeable future," Ashley Dickinson, head of fixed income dealing Sasfin Wealth.

Local bonds were a lot weaker too, with the yield on the benchmark R186 spiking through 9% for the first time since June 20, according to the Iress data.

Foreigners, which hold the largest share of local debt at about 41%, have dumped just more than R6bn worth of local bonds over the past week, contributing to the drop in the value of the rand, which acts a key variable in the outlook for inflation.

"The crisis in Turkey should be worrying everyone. A 15% currency drop means panic and Turkey companies hold a lot of euro and dollar debt with European banks," said emerging-market fund manager and analyst Donald Reid in a tweet on Friday.

"SA is very exposed to capital flight risk, which could lead to further currency weakness and forced interest rate hikes."

Investors were into the dollar because of its perceived safety, pushing the yield on the benchmark US paper to 2.8556%, from highs of nearly 3%, reached last week.

At 9.11am, the rand was at R14.4063 to the dollar, from R14.2507. It was at R16.4169 to the euro from R16.2186, and at R18.3693 to the pound from R18.1807.