Concern as rand drops to all-time low

2016-01-20 06:00

THE rand fell more than 10% at one stage to an all-time low of R17,9950 per dollar early Monday morning.

The continuing devaluation of the rand - it fell 25% last year - means consumers will likely feel the impact through higher prices for imported products such as maize, fuel and machinery in the first half of this year, analysts warned on Monday.

The currency depreciation has also added pressure on the Reserve Bank to increase interest­ rates this year, said Standard Bank analysts Walter de Wet and Shireen Darmalingam.

The currency is one of a number of negative factors that will weigh on the fortunes of consumers this year. The drought, the likelihood of an electricity price increase and the ­probability of a tax increase in the budget are also likely to squeeze consumers.

The rand’s decline- confidence in the currency is already weak due to low growth and other government policy ­issues - was triggered by a sell-off by ­retail ­investors in Japan, analysts said.

Emerging market currencies fell Monday following steep losses in Chinese shares - the Shanghai Composite closed down 5,3% from its previous day’s close.

“Global markets are still in the grips of China fears, and it is uncertain whether the Chinese­ government can do enough to reassure global investors,” said IG’s ­Angus Nicholson.

Global investors fear China may report much slower economic growth this year than anticipated.

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