On Tuesday, June 12, South African rand weakened against the US dollar by trading to a near six month low. This fall comes after U.S. President Donald Trump said that the meeting with North Korea’s Kim Jong Un had made “a lot of progress.”
Reuters reported that at 0618 GMT, the rand traded at 13.2300 per dollar, 0.6 percent weaker than its close on Monday. The unit hit a six-month low of 13.2875 on Friday.
It would be recalled that when South Africa’s president Cyril Ramaphosa assumed office in February, the rand rose to hit a three-year high against the dollar. However, that has changed as assets of emerging markets are being affected by trade tensions and crises in Argentina and Turkey.
According to Bloomberg, foreign investors, who hold around half of South Africa’s fixed rate debt, are dumping the bonds at the fastest rate on record. In the past month, the outflows reached an average of 1.6 billion rand ($122million) a day. This is also affecting the Rand as the country relies so much on portfolio flows to finance a persistent current account deficit
This is an indication that Ramaphosa’s economic honeymoon period is over and now is the time to face the economic reality of South Africa. He needs to work hard to rebuild the economy of South Africa, boost the confidence of foreign investors and the local business communities on South Africa’s economy which also includes strengthening of the Rand.
Apart from Trump’s comment South Africa’s market, this week will also focus on the central bank policy meetings. The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) starts its two-day meeting on Tuesday, where it is anticipated to raise U.S. interest rates. The European Central Bank (ECB) and Bank of Japan’s policy meetings are also due this week.