Despite an impressive recovery in the US, the Rand to US dollar exchange rate is facing a tough time. It has fallen more than 10% against the dollar this year, bringing the currency pair down to its lowest level since November 2007. As the Federal Reserve continues to hike rates aggressively, the dollar has become a stronger asset, and is weighing on emerging market currencies. The South African Rand is an emerging market currency, and its value is largely dependent on global events. However, the Rand has seen some recovery in recent weeks. Here are some factors to consider when analyzing the currency’s performance.

The Rand to US dollar exchange rate has seen some volatility in recent weeks. In November, the South African Reserve Bank hiked interest rates to 6.25%, a two-notch increase. The hike was largely a response to inflation. In addition, the Fed’s chair, Jerome Powell, surprised markets with a hawkish turn, indicating that the Fed was likely to pursue a 75bps rare hike in December. The Fed’s rate hikes have triggered global repricing of assets. In response, the US Dollar Index has risen more than 15% this year. Adding to the pressure on the rand, the United States is threatening to levy 50-to-100 percent tariffs on Chinese goods. This will hurt the value of emerging market currencies.

The US-China trade dispute has dragged the rand lower, and investors have started to sell off emerging market assets. The US dollar’s strength has weakened gold, and South Africa’s largest export is gold. Gold has lost about 20% of its value from its recent peak. Traders are looking for a reprieve.

The South African economy swung back to growth in the third quarter, partly due to lower base effects from the second quarter. However, the country’s current account deficit hit a 36-year high of 7.3% of GDP. The rand’s value was also weakened by the Eskom electricity crisis, which arose from the utility’s failure to meet energy demands. This crisis exacerbated the rand depreciation, but the country’s economy is expected to improve in the second half of 2019.

The United States is slated to release its GDP data on Thursday. This will provide the Fed with guidance on its future interest rate strategies. Traders will also look at the release of the Fed’s monetary policy minutes. In addition, investors will be concerned about the impact of Brexit. It is not yet clear how much impact the US tariffs will have on the economy. The UK economy is expected to contract in the third quarter, which could also impact Sterling. In addition, the UK’s largest businesses are reporting bleak results. In addition, rumors of a pause in the “Trade Wars” are keeping the dollar on the front foot.

The US Dollar Index has risen more than 15%, but the South African Rand is still in a downward trend. It is expected to fall to around 17.3 against the US dollar by the end of the week. This could lead to a further decline in the pair when the markets open on Tuesday.

admin Business News