Rand slumps against the dollar as weak German data hits the euro
The local currency is tracking a weaker euro, which came under pressure after a German manufacturing activity dipped to a six-year low
The rand was sharply weaker on Friday afternoon, tracking a weaker euro, which came under pressure from a downbeat assessment of the health of the eurozone economy.
A eurozone purchasing managers index dipped sharply in March, with German activity dropping to a six-and-a-half year low. A French gauge also came in below market expectations.
The euro sharply weakened, dragging the rand down with it. The rand often tracks the euro, given the importance of Europe as a trading partner. A weaker euro also often implies a stronger greenback, which puts pressure on commodity prices, which are dollar-denominated.
At 1.30pm the rand was 1.18% weaker at R14.3813/$, 0.57% softer at R16.2573/€ and down 1.47% to R18.9113/£. The euro was 0.61% weaker at $1.1304.
The rand fared worst against the pound, which has been lifted by confirmation that the EU will give UK Prime Minister Theresa May a short Brexit extension.
Local focus is now expected to shift to a review of SA’s credit status by agency Moody’s Investors Service. Moody’s is not expected to downgrade SA’s credit rating to subinvestment grade, but it is widely expected to put SA on a negative outlook from stable.
The budget deficit may also come under pressure in coming weeks, as economists begin downgrading SA’s growth forecasts, said Mercato Financial Services analyst Nico du Plessis.
Load-shedding remained a headwind for domestic activity, he said.