The rand fell to its weakest level in six weeks on Thursday as investor concern mounted over diverging monetary policies in the US and locally, along with escalating trade tension.
At 1pm, the local currency was 0.7% weaker at R18.12/$, after earlier reaching its worst level since June 19 at R18.15. The weakness at the time was attributed to global risk-off sentiment based on the conflict between Israel and Iran.
Looming US tariffs set to take effect on Friday — including a 30% duty on SA exports — have raised concern about potential global economic disruption. US President Donald Trump has said the new reciprocal measures are part of efforts to address trade imbalances.
Investec chief economist Annabel Bishop said: “Markets await US tariff decisions on a number of countries, with SA not yet communicating any recent update from the US on trade or foreign policy decisions,” said Bishop. “A number of, but not all, key US trade partners have signed deals.”
The US Federal Reserve opted to hold its benchmark interest rate steady for a fifth consecutive meeting, maintaining its range at 4.25%-4.5% during Wednesday’s federal open market committee session.
The Fed adopted a wait-and-see approach, citing elevated uncertainty tied to the economic outlook and the effect of the tariffs.
Meanwhile, the SA Reserve Bank is widely expected to lower the repo rate by 25 basis points on Thursday.
This policy divergence — rate cuts in SA versus no shift in the US — is expected to reduce the yield appeal of rand-denominated assets, leading to capital outflows and adding pressure to the local currency.
The Reserve Bank’s monetary policy committee is expected to deliver its decision at about 3pm.
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