The rand took a hit on Monday, breaking through the R19/$ level and trading around its weakest level in a month.The latest bout of weakness is not driven by South African factors – instead, fear and uncertainty have gripped the market, which means investors are dumping riskier assets for the safety of the US dollar, says Schalk Louw, portfolio manager and strategist at PSG Wealth Old Oak.
Data on Friday showed that US producer inflation grew by more than expected in July, as the cost of services rebounded at their fastest pace in nearly a year. A string of weak Chinese economic data has also unnerved the market, with a crisis at the Chinese property giant Country Garden compounding anxiety. The company has some 1.15 trillion yuan in debt, but missed bond payments earlier this month and has warned of large losses amid a slowdown in the local property market.
This has triggered concerns about potential corporate collapses in China in global markets. Usually, the rand bears the brunt of the"risk off" sentiment caused by these concerns because it is one of the most liquid emergency market currencies and can easily be sold off, says Louw. The rand is among the top 20 most traded currencies in the world.
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