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Rand crosses R20 to the pound level

A number of global factors appear to be affecting the local currency.

A number of overseas factors have impacted on the local currency including dollar strength. Picture: Christa Eybers/EWN.

JOHANNESBURG - The rand has come under severe pressure breaking through the R20 to the pound level and dropping to R12,82 to the dollar.

A number of global factors appear to be affecting the local currency, which has lost major ground over the past few weeks.

However, despite the rand dropping to lows last seen in 2001, it seems to be faring better than other emerging market currencies, including Russia and Brazil.

Dollar strength and a decision next month on US interest rates appear to be the main forces driving the rand lower.

But Nedbank economist Dennis Dykes says other countries are worse off.

"Across the world, the Brazilian real is under far more pressure from the rand, even though the dollar which is a commodity currency is under some pressure."

With petrol dropping by 51 cents a litre last night, its hoped that the low oil price will see further cuts.

But the weaker rand may impact on this with the Reserve Bank also warning recently that a weaker currency could affect its next interest rate decision.

Nedbank economist Isaac Matshego says, "The main thing has been the speech that was made by one of the US policy makers. He indicated that the US fed is likely to start raising US interest rates in September."

This is good news for exporters, but the opposite for those travelling abroad and bringing goods into the country.

Dykes adds, "I think it's mainly the international environment, we've got commodity prices under a lot of pressure at the moment and at the same time people are worried about interests rates starting to go up in the US."

Reserve Bank governor Lesetja Kganyago has warned that a volatile rand may impact interest rates here, while a drop in fuel prices may also be stunted, despite the low oil price.

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