EMSIE FERRERIA, Cape Town | Tuesday 6.00pm
ECONOMISTS said a stronger dollar rather than a weaker rand has precipitated the downward spiral in the local currency, which crashed through the the crucial R6,50 early Tuesday, only to recover by later afternoon.
At one point in early trade the rand was heading for the R6,55 mark as persistent negative sentiment continued to dog the currency.
“This is not really a matter of the rand falling but of the dollar strengthing,” said Jac Laubscher, chief economist of financial group Gensec Assets Management. “While the rand has dropped 5,5% against the dollar this year, the Australian dollar has dropped 9,5%.”
Laubscher said that the fall of the rand has reverberated through the bond market and that foreign investors have begun liquidating their South African assets, causing the rand to drop further still.
Azar Jammine, an analyst for economic research group Econometrix, also ascribed the rand’s weakness mainly to the strength of the dollar. He said the dollar was rising dramatically against the euro as a result of high, and potentially rising interest rates in the United States.
Jammine and Laubscher agree that confidence in the rand has been undermined by remarks by central Reserve Bank governor Tito Mboweni.
The rand fell by more than 10 cents last Friday after Mboweni had indicated that interest rates were likely to rise, not fall, in the next few months.
“Some people were looking for cuts and were disappointed by the Reserve Bank’s more hawkish stance,” Jammine said.
He said Mboweni has made a mistake by hinting that Finance Minister Trevor Manuel had been too hasty last month in introducing inflation targetting, setting a figure of 3-6% in two years. — AFP