Rand hit new all-time low COVID-19

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Rand to Dollar exchange: Why SA’s currency has hit a 13-month low

It’s never easy viewing, but the Rand to Dollar exchange rate doesn’t look great for South Africa. Here’s why ZAR has hit its worst slump for a year.

Rand hit new all-time low COVID-19

Photo: Adobe Stock

The topsy-turvy rollercoaster ride that is the Rand to Dollar exchange rate has found a lower trough than usual this week. Uncertainties in global markets – and matters at home – have put the South African currency on shaky ground, with ZAR threatening to slump to an even worse performance.

Rand to Dollar exchange rate for Tuesday 1 October 2019

According to Trading Economics, the Rand was trading at R15.34 to $1 by the close of business on Tuesday. After gradually dipping below the R15 mark in recent weeks, signs of revival have been few and far between. Now, with a chaotic week of domestic and foreign policy announcements ahead, the R15.50 mark could well be breached.

That would mark one of the worst performances in the past three years. ZAR slipped to R16.40 in May 2016, but has since enjoyed a comfortable home in the R13 – R15 range. Times are looking tough again, and the outlook isn’t in our favour this week. Here’s what is causing the wobble:

Rand to Dollar exchange rate: What’s got ZAR spooked?

China-US trade war escalates

Due to President’s Trump threat to blacklist Chinese companies in the Staes, the US Dollar is currently gaining against riskier currencies, and that includes ZAR: It’s been forecast that 145 000 jobs have been added to the US economy recently. But when the announcement is officially made on Friday, any deviations from this amount will cause further trouble for the Rand to Dollar exchange rate.

Country on a knife-edge

The ANC is expected to announce plans to address economic stimulation on Wednesday. Also known as the Economic Reform Paper, Finance Minister Tito Mboweni is set to make some bold, drastic decisions. This is likely to encounter resistance from their alliance partners Cosatu and the SACP, adding to South Africa’s economic uncertainty.

Of course, Eskom are somehow responsible for the Rand to Dollar exchange rate…

Those with a keen fiscal eye will have noticed that Fitch Ratings lowered their outlook on Eskom’s stand-alone credit rating to negative on Monday. They have blamed weak revenue growth and lower tariff increases for the scepticism. It’s not the type of thing that benefits us in the Rand to Dollar exchange.

Faltering Euro Zone growth

Yes, Brexit is still dragging on. But we’re in the endgame here. With no-one knowing exactly how the UK will leave the EU at the end of the month, both the Pound and the Euro are under severe strain. That doesn’t mean ZAR can capitalise, however. Demand for our currency has been dampened in an otherwise popular region.