GLOBAL factors continued to put the rand on the back foot yesterday as the local currency began the week under serious pressure, slumping to a one-year low.
The rand yesterday breached the R15.80 mark against the US dollar, its lowest since November last year, pressured by a stronger dollar and concerns over new lockdown restrictions in Europe, as well as some hawkish comments from Fed officials.
Investors are growing increasingly worried about the spread of Covid-19 in Europe as the onset of cold weather sees the continent battling a fresh wave of infections.
Several nations are reporting record high infection rates and have begun introducing full and partial lockdowns, with Austria becoming the first EU country to go back into a national lockdown as of yesterday.
Anchor Capital's co-chief investment officer Nolan Wapenaar yesterday said that the rand was under pressure as the market was currently focused on global factors.
He said the market was looking through South Africa's domestic issues, including load shedding, deteriorating terms of trade and continued political infighting.
“As we see Europe struggling with the virus, threats of lockdown and escalating civil unrest, the euro is coming under pressure at a time when the US economy seems to be soldiering ahead at a rapid pace,” Wapenaar said.
“This is manifesting as a stronger dollar and consequently a weaker rand from our perspective.
“The extent to which the dollar strengthens is difficult to project, though for now the momentum seems to continue to support the stronger dollar.”
The rand weakened against almost every single G10 currency, in spite of the SA Reserve Bank last week deciding to lift its benchmark interest rate by 25 basis points to 3.75 percent for the first time in three years.
FXTM market analyst Lukman Otunuga said the rate hike provided little support to the rand, which had weakened to its lowest level this year.
“Rand bears could be drawing strength from the fact that markets see the South African Reserve Bank's decision as a dovish hike, especially after the bank confirmed that further tightening would be gradual.
“As concerns mount around what this means for the global economic recovery, buying sentiment towards riskier currencies like the rand could take a hit.”
Meanwhile, rating agencies S&P Global and Moody's on Friday both opted not to release reviews on South African debt.
BUSINESS REPORT ONLINE