Rand crash – here’s why South Africa is back to R19 to the dollar

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While the rest of South Africa took a mid-week breather to celebrate Women’s Day, the rand continued to weaken against the dollar, breaking through the R19/$ barrier once again.

On Wednesday (9 August), the rand broke through R19/$ to R19.04, before pulling back slightly to R18.95 in early trade on Thursday.

The rand last hit R19 to the dollar in early July, after spending May and June stuck above those levels due to various troubles in the country.

The rand was one of the worst-performing major currencies in the world in the first half of the year, climbing to an all-time high of almost R19.82/$ in May. Last week, it was once again the worst-performing currency.

The kick in May came as markets worried over the stability of Eskom’s grid, while allegations of South Africa arming Russia – inviting potential sanction from the US – keep investors at bay. While all of this was happening, the country faced stubbornly high inflation and the prospect of higher interest rates.

The fallout from these woes continued in June and even July with a significant selloff locally, exacerbated by global market moves – particularly in the United States.

Contrary to the clear headwinds faced in May and June, however, the current rand weakness is less obvious.

According to an analysis from Rand Merchant Bank, the rand is underperforming “for no obvious reason”.

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