The rand slumped more than 1% on Wednesday on renewed fears that US President Donald Trump could fan the trade war with China and threats against US companies not to move production offshore.
By 11:01 the local unit was trading 1.05% weaker at R13.68 after flirting with the R13.70/$-level earlier in the session.
At 15:46, the rand was trading at R13.71/$.
"The rand is the weakest emerging market currency this morning followed closely by the Turkish Lira," said Wichard Cilliers of TreasuryONE in a morning snap note. "The [US dollar] and risk-off trade conditions in the global economy is causing most of this, with EUR/USD and GBP/USD all softer against the dollar."
TreasuryONE's Andre Botha earlier said that Trump's rhetoric on tariffs, trade and putting up barriers to keep production in the US could cause increasing uneasiness if it continues.
He said traders may becomes more risk-averse as the market chews over what effect Trump's protectionism would have on US wages and interest rates.
"[On Tuesday] Harley Davidson wanted to move their production away from the US due to the tariffs that President Trump wished to impose. In retaliation to this, President Trump warned Harley Davidson that they would be taxed like never before if they produced motorcycles outside the borders of the US," said Botha.
"This is the length President Trump will go to ensure production stays within the US borders," he said.
"[So the] market becomes a little more skittish of [emerging markets], and we could see some EM weakness should the rhetoric of President Trump continue."
RMB economist Isaah Mhlanga said disruptions from the trade war are going to be painful. The trade uncertainty also makes the US Federal Reserve's setting of monetary policy a lot harder, he said.
"As we have said before, the bottom line is that if the trade war remains unresolved or escalates, there will be no winners – only losers – all around."
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