Rand's steep fall spurs jitters

2013-06-10 13:19

The steep fall of the rand deepened today, with the South African currency losing 1.7% of its value against the dollar in early trading.

The dollar was trading at R10.18, close to recent four-year lows of R10.28.

The currency of Africa’s largest economy has lost nearly 20% of its value against the greenback in the last year, with the weakening speeding up dramatically since May.

Standard Bank currency analyst Bruce Donald blamed the rand’s slide on “a cocktail of adverse global and domestic developments”.

The strengthening of the US dollar has bit into emerging market currencies, the rand included.

But concerns about South Africa’s mining sector, a fragile public budget and doubts over the future of a government plan to reinvigorate the economy have all taken their toll.

Sentiment was also weakened early on Monday by news that the European Union may block some South African exports amid allegations and counterallegations of poor phytosanitary standards and protectionism.

Now concerns are growing that the weakening rand may push growth below 2% for the year, at a time when most African economies are posting stellar growth.

With South Africa heavily dependent on imports, any weakening of the currency risks fuelling already high inflation.

Business Day today declared the country was approaching a “tipping point”.

“Foreign investors are starting to vote with their feet, as the bond market sell-off and sharp depreciation of the rand so clearly illustrate,” the paper said in an editorial comment.

South Africa’s central bank governor on Thursday called for strong government leadership to steer Africa’s largest economy from a prolonged slump.

“Much more important than the precise elements of a strategy is for government to be decisive, act coherently and exhibit strong and focused leadership from the top,” said SA Reserve Bank Governor Gill Marcus.

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