Rand’s risky roller coaster
As long as the US Fed remains slow and steady, the rand should rally and SA’s economic recovery should remain on track
The rapid depreciation of the rand, coupled with a surging oil price, is curbing the potential for further interest rate cuts. And though there is a case to be made that the rand will rally as the dollar weakens again, there is no room for complacency — the rand’s fall has been surprisingly hard and fast. The consensus view is that the rand’s slide from around R11.65/US$ to R12.60/$ over the past two weeks has been driven entirely by US dollar strength. On Monday the rand opened at R12.53/$ on soft US employment data, having peaked at R12.71/$ last week — its weakest level in four months. Granted, April was a bad month for nearly all major emerging-market (EM) currencies. The yield on US 10-year treasury bonds rose above 3% for the first time since 2014, sucking in capital and boosting the dollar. The dollar is being buoyed by expectations that the US Federal Reserve will become increasingly hawkish, given upbeat US economic growth data and rising US inflation. Most EM currencies we...
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