RAND REMAINS IN A WEAK POSITION TO THE DOLLAR

THE RAND REMAINED weak above the R17-mark against the US dollar yesterday as the size of South Africa’s economy in the second quarter shrank smaller than what it was before the pandemic.

Data from Statistics South Africa (StatsSA) yesterday showed that real gross domestic product (GDP) contracted by 0.7 percent quarter-on-quarter due to heavy flooding in KwaZulu-Natal in April and intense power outages.

However, the economy was up a touch by 0.2 percent on an annual basis.

The subdued economic growth saw the rand weakening to R17.30 against the greenback around 4pm while stocks were stable with the JSE benchmark index remaining almost unchanged.

The rand and other emerging markets economies currencies have been struggling to gain traction as investors have sought the safety of the dollar amid rising global recession risks prompted by the worsening energy crisis and expectations of further monetary policy tightening.

The South African Reserve Bank (SARB) is expected to continue increasing interest rates later this month as inflation for July stayed elevated at 7.8 percent though it might have peaked with the price of global ol softening.

Matrix Fund Managers macro-strategist and economist Carmen Nel said much depended on the US Federal Reserve’s policy path, the rand’s response, and ongoing domestic fiscal prudence.

“Newsflow this week that the Cabinet may consider a “relief package” to assist South Africans in the face of surging costs comes at a time when the worst of the inflation surge is already in the base,” Nel said