BREAKING | Rand breaches R19/$ | Business

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The rand breached the R19/$ level on Thursday, hit by a toxic cocktail of load shedding and a deepening economic crisis, as well as interest rate concerns. | News24_Business

He warned that rand weakness could worsen South Africa's worrying inflation situation, as imports like fuel will keep prices high.

"Fighting inflation is much harder when the economy is already underperforming, as tighter financial conditions have the effect of cooling economic activity more broadly. Yet, if allowed to persist, high inflation will either fatally undermine the economy’s growth potential or raise the nearer-term costs of eventually bringing inflation back to target," Kganyago said, possibly indicating that another rate hike will be implemented at the end of month.

Old Mutual chief economist Johann Els believes the rand is undervalued at current levels. He says the rand may recover back to below R17 by the end of the year - if US inflation cools enough for the Fed to definitively halt hikes. This will weaken the dollar. More interest rate hikes are expected in the euro zone, which may also increase pressure on the US currency.

 

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