Although the Rand was able to rise earlier this week after the fortnight long strike at Exxaro Resources Ltd (South Africa’s second largest coal mine) finally ended and Cyprus secured a bailout, the currency has weakened again as a result of the ongoing turmoil in Europe.
At the current exchange rate 1 US Dollar will purchase 9.2865 South African Rand as of 10:43 am GMT
Comments issued by various European leaders have painted a conflicting picture of the likelihood of bank depositors and bond holders footing the bill of future bailout packages and the Euro has broadly softened as a result.
As Europe is South Africa’s main trading partner, fear that the Cyprus situation could be emulated by other struggling nations within the Eurozone (such as Portugal and Spain) has also worn on the Rand.
As Ion De Vleeschauwer, chief dealer with Johannerburg’s Bidvest Bank, comments: ‘The Euro is really struggling to maintain any sort of headway at the moment, the comments that keep coming out of Europe are not good. People are still very concerned that what we see happen in Cyprus is going to spill over to the rest of Europe.’
Similarly strategist Adam Cole stated: ‘The precedent set by Cyprus and the political uncertainty in Italy mean that risk premia in the Euro-region will continue to go wider. The risk of the bail-in of depositors in a future banking crisis has increased and market prices have to reflect that. The Euro will grind lower.’
The Rand weakened by roughly 0.41 per cent this morning, taking the currency to 9.278 against the US Dollar.
Any additional negative news from Europe could cause the Rand to post further declines today.
Meanwhile, the publication of South African credit and money supply figures, as well as trade and producer inflation data for the nation could cause Rand movement tomorrow.
Comments are closed.