Johannesburg | Thursday
THE South African rand hit record lows against two major currencies on Wednesday, dashing hopes that the government might announce an interest rate cut next month.
The besieged currency was trading at 12,26 to the pound sterling and 7,77 to the euro early on Wednesday. Late Tuesday, the rand recorded its lowest level yet against the dollar when it closed at 8,44 dollars, but it traded slightly higher at 8,42 dollars on Wednesday.
“These are the lowest figures ever recorded against the major currencies,” said George Glynos, a market analyst with Standard and Poor’s Money Market Service in Johannesburg.
“There is a plethora of negative sentiment out there. This included the current situation in Zimbabwe and labour action in the country,” Glynos said.
Thami ka Plaatjie, the secretary general of the hardline Pan Africanist Congress (PAC), recently said his small party supported land invasions in Zimbabwe.
“Although its not the official policy of the PAC, the damage has already been done,” Glynos said.
He noted that the current labour action by some 20 000 members of the National Union of Metalworkers of South Africa (Numsa), who have been on strike at international car manufacturers since August 6, had also hurt the rand.
An announcement by South Africa’s largest trade union federation, the Congress of South African Trade Unions (Cosatu) of a two-day general strike later this month to protest government privatisation policies, sent the rand plummenting.
“This was terrible news. Just think to yourself, if you are a foreign investor, this is something you really don’t want to see,” Glynos said.
Another market analyst said the rand’s poor performance was also due to a slump in the US economy and the financial woes of Argentina.
Andile Mazwai, an analyst at the Barnard Jacobs Mellet brokerage, said as foreign investors became jittery about the situation in Argentina, they were also not prepared to put money into other emerging markets like South Africa.
“This has a contagious effect on South Africa,” Mazwai said.
Statistics South Africa released inflation figures on Tuesday which put the inflation rate at 6,4%, higher than market forecasts of around 6,1%.
The Reserve Bank has set a target of restricting inflation to between three and six percent next year. – AFP