Johannesburg | Wednesday
THE rand hit a record low value against the dollar early on Tuesday because of concern in South Africa about the political and economic situation in neighbouring Zimbabwe, dealers said.
The rand fell to 8,48 to the dollar shortly after South African markets opened on Tuesday, but soon recovered to 8,46.
The rand was being traded late morning at 12,25 to the pound sterling and 7,60 to the euro. Late last month it hit all-time lows against the two currencies – 12,26 to the pound and 7,77 to the euro.
“Once again it’s an all time low,” said Michael Keenan, market analyst at Standard and Poor’s Money Market Service in Johannesburg.
“There is just a lot of bad sentiment out there. One of the major concerns is that (Zimbabwean President) Robert Mugabe may declare a state of emergency,” Keenan said.
Keenan said that while nothing specific has been mentioned about a state of emergency, “the perception is there among traders, and unfortunately these guys trade on that.”
Starved of support from the International Monetary Fund, which in 1999 suspended loans to Harare, the Zimbabwean economy has in been in free-fall, with foreign exchange critically short, inflation at about 70% and unemployment hovering at over 50%.
Political instability has also grown, with Mugabe becoming increasingly isolated in southern Africa and overseas as a result of his crackdown on perceived opponents, including the opposition, the press and the judiciary.
“Traders are still very nervous about Zimbabwe,” Keenan said.
Newspaper reports last week quoted South African Reserve bank governor Tito Mboweni as saying that the “wheels had come off in Zimbabwe”, blaming weakness of the rand on the situation in that country.
Mugabe plans to seize 90% of white-owned farms to re-settle black farmers and landless peasants, without paying compensation to the owners.
The land reform scheme has been wracked by violence and closely tied to the intimidation of opposition supporters.
The Johannesburg-based Business Report newspaper said analysts predicted the rand could reach the technical and psychological level of 8.50 to the dollar sooner rather than later.
But analyst Andile Mazwai with Johannesburg brokerage Barnard Jacobs Mellet said all was not doom and gloom.
It was, he added, more a case of the rand and other currencies competing against a stronger dollar than purely a weakening of the South African currency.
“The rand is certainly not plummeting,” he said, pointing out that South African mining houses are benefiting from exports due to the stronger dollar. – AFP