Rand dip raises fears it may go much lower

THERE were renewed fears yesterday that the rand could soon hit R13/$ as it weakened to a 14year low against the dollar and, for the first time, plunged below R20 against the pound.

The rand breached the R12.80/$ level in the early afternoon to trade at R12.8282/$ before recovering to R12.7916/$ at the JSE’s close.

It has lost 10.35% so far this year against the greenback.

It was not the only currency to be hit. South Korea’s won and the Malaysian ringgit led emerging market currencies lower amid speculation that the US Federal Reserve would increase interest rates as soon as next month, curbing demand for riskier assets.

Bonds fell, while shares of energy producers gained with a rise in oil prices.

Fed Bank of Atlanta president Dennis Lockhart said in an interview with the Wall Street Journal that it would take a significant deterioration in economic data to convince him to put off increasing rates in September. That helped to fuel the sell-off.

Standard Bank trader Warrick Butler said the next resistance level for the rand was at R12.90/$. “Over the longer term it could push to R13.20/$, but would probably first correct to firmer levels.”

The local currency recorded a record low of R13.85/$ in December 2001.

The next big factor that may move the market will be US payroll data to be released tomorrow. Figures showing strong jobs growth would indicate a healthier US economy and could send the rand into a tailspin as it will almost certainly result in a rate hike in September.

Stanlib retail investing director Paul Hansen said the rand had held up better than other emerging market currencies — until now.

The slowdown in China’s economy remains a threat as it is likely to lead to weaker demand for commodities, which affects the rand because it is regarded as a commodity-based currency. With Bloomberg