Rand slips 3% as SA edges towards recession

Rand - [Google Images]

The rand fell as much as 3% against the US dollar on Wednesday, buffeted by a spate of bad domestic news, as global investors shy away from emerging-market currencies.

Earlier, ratings agency Moody said it did not expect the South African government’s fiscal consolidation to proceed as quickly as previously expected.

“Growth this year is expected to be lower than the government’s own estimates, weighing on tax revenues, while the public-sector wage agreement in June also brings extra, unbudgeted costs,” said Moody’s senior credit officer Lucie Villa.

Local retail sales data was also downbeat, growing 0.7% year on year in June, well below market expectations of a rise of 2%.

This, along with recent data, raises the serious risk that SA suffered a technical recession in the second quarter, although economic activity was still expected to pick up in the second half of the year, Capital Economics senior emerging-markets economist John Ashbourne said.

Global focus remains on Turkey, as the market attempts to gauge the risks from that country’s financial crisis.

The Turkish lira was once again sharply lower after that country announced new tariffs on a range of US goods, which analysts said was a sign that tension between the two countries was escalating.

At 3pm, the rand was at R14.607 to the dollar, from R14.2446, having earlier reached an intraday low of R14.7442. It was R16.5289 to the euro from R16.1583 and at R18.5385 to the pound from R18.1157.