Just as we started to believe in the rand’s rally, it started to slide again. Global markets have been a bit like headless chickens, rushing in all directions amid the hot debate about whether US interest rates have peaked and when the first cuts will come.
That has caused the rand and other emerging market currencies to rush all over the place in response. The rand had been heading towards R20/$ again in early October. By the end of last week it was right back at R18.26 as the dollar weakened on expectations US rates had peaked. Then it fell to R18.50 again on mixed messages from the US Federal Reserve before a speech on Wednesday by Fed chair Jerome Powell that was expected to be hawkish.
Rally or not, the rand is about 4% weaker than it was a year ago, and it is still one of the worst-performing emerging market currencies. And if it is weak against the dollar, it is weaker still against key currencies such as the euro and the pound. All of that has implications for domestic inflation and interest rates.
But while SA will continue to be buffeted by global market swings and roundabouts, it does have at least some power to influence the rand’s fortunes. Less load-shedding and better growth prospects would boost investor sentiment and make SA look less risky. So too would a wiser foreign policy narrative and better management of the public finances.
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