In the early hours of Thursday, the South African rand reached an unprecedented nadir, further exacerbating the significant decline it experienced throughout May, attributable to the deteriorating outlook among investors and their increasingly pessimistic sentiment.
The South African rand plummeted to a notable low of 19.9075 against the U.S. dollar, surpassing its previous record of 19.8600. As of 0727 GMT, the currency was trading at 19.8900, reflecting a decline of over 0.8% compared to its previous closing value.
According to Andre Cilliers, Currency Strategist at TreasuryONE, the South African rand is currently firmly entrenched within the range of R19.50 to R20.00. However, there are lingering short-term concerns regarding the possibility of breaching the R20.00 threshold due to ongoing investor outflows and limited inflows from exporters.
Investors have grown increasingly concerned due to two significant factors: the deteriorating state of rolling blackouts in South Africa and the recent allegations from the United States regarding the country’s supposed arms supply to Russia last year. These developments have left a palpable sense of unease among investors, affecting market sentiment negatively.
During May, the South African currency experienced a dramatic downward spiral, resulting in a depreciation of over 7% against the U.S. dollar. Meanwhile, the U.S. dollar exhibited strength, trading 0.27% higher when compared to a basket of global currencies.
At present, shares on the Johannesburg Stock Exchange are displaying positive momentum, with the blue-chip Top-40 (.JTOPI) index experiencing a gain of over 1% in its latest trading session. This upward movement signifies an encouraging trend in the market.