Rand falls to 12-month low: 'Nothing surprising about the currency moderating' – CapeTalk


The rand slumped to its weakest level against the US dollar in almost 12 months on Tuesday morning.
It traded at R15.85 as the dollar rallied – the local currency's worst performance since November 2020.
RELATED: Rand slumps to worst level since March
The rand was affected by events in the US, where President Joe Biden backed Federal Reserve chairperson Jerome Powell for a second term.
Powell pledged to use the tools of the central bank "to support the economy and a strong labour market and to prevent higher inflation from becoming entrenched".
Bruce Whitfield interviews John Cairns, Global Markets Strategist at Rand Merchant Bank (RMB).
The big theme all year has been US inflation – how far is it going to accelerate, how quickly is it going to come down… It's accelerated further than people thought…
So US interest rates are on their way up, the dollar is stronger and everything is walking in front of the strong dollar.
It's true that the rand is the weakest in one year, but at just under R16 not looking particularly weak… In the past four months it's weakened from 'over' levels to more moderate territory… There's nothing surprising about the levels where we are now.
A reason to be more negative is actually the drop-off in commodity prices says Cairns.
That's taking away a major positive not only for the rand but for South Africa as well. We should put that in the context of of an economy that is experiencing massive capital flight… that has been disguised by this record run in commodity prices that has boosted our exports.
Part of this is due to global fundamentals… This year as we've seen US rates rise we've seen capital leaving emerging markets generally… South Africa has got problems, but other emerging markets have even bigger problems…
Listen to Cairns' analysis in detail below:
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