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The rand continues to weaken hitting new record lows

by , 10 November 2015

Since the US Labour Department released its jobs data on Friday, the rand has been weakening rapidly against major currencies.

The rand is now trading in unchartered territories as it trades at levels unseen before.

Let's take a closer look at what's going on…

The rand is still reeling following good US jobs data

The rand kicked off the week still digesting news of “solid US employment data last week,” reports Fin24. The positive data release has led to increased speculation that the US Federal Reserve will indeed hike rates next month.
Since the US released the data on Friday, the rand has continued to hit new lows. You can see how much the rand has weakened in the chart below...
Chart of the USD/ZAR

By mid-afternoon yesterday, the rand hit “a new record low of 14.3270 to the greenback,” notes MoneyWeb
And it could get worse for the local currency, says BDLive. Analysts reckon if the US does increase interest rates, “the rand will lose further ground”.
Ion de Vleeschauwer, the chief dealer at Bidvest Bank, believes we’ve not seen the worse yet for the currency, reports MoneyWeb. He expects the rand to continue to weaken over the coming months.

The rand could depreciate further

The next few weeks will be telling for the rand as traders will be watching releases of all important US economic data, says BDLive. As Mr de Vleeschauwer point out, if this data comes “in much better than expected… the market will begin to price in further rate hikes”.
The beneficiaries of such a weak local currency are South African gold miners and other companies which export their goods, adds MoneyWeb. As these companies earn dollars and other currencies, they benefit from a weaker unit.
At time of writing, the rand was trading at R14.29 to the dollar, R15.37 to the euro and R21.60 to the pound.
So not great news for the rand. If data out of the US continues to point towards a sustained economic recovery, the odds increase that the Fed will hike rates, drawing more money away from riskier assets like the rand.
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The rand continues to weaken hitting new record lows
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