Cape Town - The rand has breached the R16/$-level on Tuesday afternoon as a barrage of factors, including domestic political turmoil, put pressure on the local unit.
By 17:02 the rand was trading at R16 to the greenback after reaching R16.02 earlier in the session, as Asian equities retreated from a 10-week high, the yuan depreciated as China’s central bank cut its daily fixing by the most in two months and gold fell to its lowest level in almost two weeks as oil dropped another 2%.
The US equity markets also opened in the red as oil prices dropped and US data showed retail sales declined in both January and February.
“All these factors are placing pressure on emerging markets and especially the ZAR,” said TreasuryOne.
TreasuryOne also said the response by the Hawks on comments made by Finance Minister Pravin Gordhan added to the rand rout.
News24 reported that the Hawks claimed Gordhan must have known about the second deadline (March 14) and “had the minister, like any law-abiding citizen, complied and provided answers, we would not be where we are today”.
The Hawks further said "investigations will not be stalled by an individual who refuses to
comply with the authorities and demand a preferential treatment".
The Hawks police unit is said to take legal action against Gordhan. “ZAR doesn't like this news at all, trading up at R15.9250", TreasuryOne said in an earlier note to clients.
TreasuryOne said many other factors are also putting pressure on the ZAR. “There seems to be some unwinding in JPY carry trades; Iran has increased oil output placing pressure on the oil price; US retail sales came out at -0.1% for February and was revised lower to -0.4% in January. This will place pressure on further interest rate hikes in the US.
“There was also a car bomb in Berlin, so generally the markets are very nervous at this stage, with US markets also opening lower.
“The FOMC meeting tomorrow night and then the local MPC (monetary policy committee) meeting (on Thursday) will take centre stage to where the market wants to go, or until we have some political comments again.”