The SA Daily
14 August 2019
SA risks incur rand losses
Shireen Darmalingam
- Thus far in August, emerging market (EM) currencies have lost ground to the dollar. The Argentinian peso, South African rand, Colombian peso and the Brazilian real have shed over 3%. The rand is down 6.4% already just this month, compared to a year-to-date loss of 7% and 13.9% in 2018. It’s at R15.12/$ now, after touching R15.46/$ earlier this week. There’s been EM contagion from Argentinian politics where the peso is down 21.2% this month and 32.3% year-to-date.
- EM currencies’ fate remains tied to global trading conditions; and, the US-China trade war continues apace. The US however now reportedly may delay tariffs until December on selected Chinese goods set to have taken effect next month. This has eased tensions somewhat. Talks expected to take place in September remain, however, uncertain. EM currencies are therefore likely to remain in the slipstream of swings in global sentiment.
- The rand seems destined to stay weak in the short term while SA’s economic and political environment remains so shaky. While being hammered by global risks, the rand also faces the risk of a downgrade by Moody’s; the agency recently said that the most recent government bailout of Eskom a couple of weeks ago would be credit-negative. SA’s urgently needed political and policy reforms could, however, support the rand should they transpire in due course.
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