Rand crashes through R17/$ | Fin24
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Rand crashes through R17/$

Mar 18 2020 16:02

The rand briefly broke through the R17/$ level on Wednesday afternoon. It was last trading at R16.91 – 2% weaker on the day.

The SA currency was flat against the pound at R20.03 and 1.6% down against the euro (R18.53).

If the rand ends the day around these levels, it may set a new record-low closing price. Bloomberg reports that the currency’s weakest ever closing level was R16.8717/$ on 18 January 2016.

But the weakest level the rand has ever hit during a trading day was R17.9169 - sparked by a shock fall in the Chinese market, also in January 2016.

Investors are nervous that South Africa’s monetary policy committee will announce a large interest rate cut on Thursday. A lower interest rate makes the rand less appealing to foreign investors.

But a bigger factor was a sharp rally in the dollar. Across the world, currencies are bleeding against the dollar as coronavirus fears triggers extreme market volatility.

The pound has hit its lowest level against the dollar in 35 years. It was last trading at $1.1875. The Bank of England slashed interest rates to a record low of 0.25 per cent last week. 

The Aussie dollar fell to its lowest level in seventeen years and the Russian ruble was its weakest in four years.

The dollar has benefited from a surge in demand for the safety it provides amid severe market concern.

The US has announced $1.2 trillion in fiscal stimulus which could stem the risk of a US recession, while offering some measure of calm for investors, but the economic outlook remains highly uncertain at this point in time and does not yet warrant venturing out significantly into more risky assets, says Han Tan, Market Analyst at FXTM.

"Such broad caution should ensure a supportive environment for the Greenback until the coronavirus-inspired fears start to fade away with infected cases starting to recede."



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