Harry Scherzer, CEO at Future Forex
There were multiple factors that resulted in the rand plummeting to a low of 19.26 to the dollar on Tuesday 5th September, which is far lower than it was in previous weeks. It’s mainly a combination of a soaring dollar and a weakening rand.
So beginnig with the soaring dollar, there are two reasons for this. The dollar itself is remaining strong; in fact, yields on Treasury bonds have actually increased from 4.22% to 4.26% on the dollar. But probably the bigger impact is that alternative currencies and alternative economies like China are floundering in their post-Covid recovery.
Consequently, some of China’s biggest property firms are on the verge of bankruptcy, the country’s youth unemployment rate has reached an all-time high of over 20%, and political concerns are scaring investors away from investing there. This is leading to emerging markets having less traction and investors putting their funds back in the dollar.So that is what has caused the strong dollar. But along with this, we’re not helping ourselves within our borders, with Eskom having implemented stage 6 loadshedding following plant breakdowns.
It’s a combination of Eskom not supporting us in South Africa resulting in a weaker rand, but probably the bigger factor here is the soaring dollar leading to a weaker rand as a result.
