Analyst: Local, global factors driving rand’s decline

The rand is currently trading at R14.69 to the dollar, R19.13 to the pound and R17.16 to the euro.

Picture: Christa Eybers/EWN

JOHANNESBURG - The rand has weakened as financial crises in Turkey and Argentina rattle market sentiment.

The local currency traded down by almost 2.5% on Thursday as the Turkish lira sank and Argentine peso hit record lows.

The Argentine peso crashed over 7% after investor confidence there collapsed following its request to the International Monetary Fund (IMF) to speed up disbursement of a $50 billion loan programme. Sentiment towards emerging markets was also hurt by Turkey’s ongoing financial crisis, and the lira was amongst the hardest hit by the fresh bout of investor nervousness, diving to a two-week trough.

At 8am, the rand was trading at R14.69 to the dollar, R19.13 to the pound and R17.16 to the euro.

Market analyst Viv Govender says local and global factors are driving the rand’s decline.

“We could call it a bit of a perfect storm. There are global weaknesses happening. We saw a number of articles in the New York Times and Wall Street Journal talking about South Africa and expropriation without compensation debate. We also had the Donald Trump tweet happening a few days later.”

Concerns over the health of the domestic economy also put pressure on the currency. South Africa’s budget deficit in July increased to R95.98 billion from R92.21 billion shortfall a year ago, Treasury data showed.

Government bonds also weakened, with the yield on the benchmark paper due 2026 up 10 basis points to 9.04%.
On the bourse, the Top-40 index was down 2.55% to 52,650 points while the broader all-share index slipped R2.3 to 58,803 points.

MTN closed 19.41% at R86.50.

Nigeria’s central bank said $8.1 billion had been illegally moved abroad because the company’s bankers, who include South Africa’s Standard Bank’s Nigerian unit Stanbic, had failed to verify that Africa’s biggest telecoms company had met all the foreign exchange regulations.

Standard Bank denied any wrongdoing. Its shares fell 2.4% to R185.

Additional reporting by Reuters.

(Edited by Shimoney Regter)