Johannesburg - The gains made by the rand after President Jacob Zuma returned Pravin Gordhan to the Treasury are being wiped away as the currency has started the year on the back foot, slipping 1.3 percent against the dollar yesterday.
The thorn in the side of the rand in the new trading year has been increasing dollar strength.
Yesterday, the dollar gained after data showed US private-sector employers added 257 000 jobs in December.
The 257 000 increase in employment exceeded the most optimistic forecast of economists surveyed by Bloomberg and marked the biggest jump since December 2014, figures from the ADP Research Institute in Roseland, New Jersey, showed.
The local currency, which lost about 34 percent of its value against the dollar last year, was quoted at R15.8265 to the dollar at 6.10pm yesterday after reaching an intraday high of R15.8716, which was the local unit’s weakest level since December 14.
Fears are that it may again flirt with the record low of R16.0543 reached on December 14 after Zuma sacked Nhlanhla Nene as finance minister and appointed little-known MP David van Rooyen to the post.
However, Zuma later made an about turn and reappointed Gordhan, all in the space of four days.
Emerging markets
Analysts said the currency was still feeling continued pains from that slide, but that it was now also being hounded by lacklustre appetite for emerging markets after China data indicated an economic slowdown that has spread like contagion through the cluster.
In addition, tensions in the Middle East and worries about North Korea’s nuclear plans had prompted investors to shun emerging market stocks.
“Emerging markets across the board are under pressure and with North Korea, this morning, flexing its muscles. It has put fear into investors in emerging markets,” RMB forex trader Jan Sluis-Cremer said.
Despite the weakness, Sluis-Cremer said the R16.05 low was unlikely to be surpassed for now, but the rand needed the currency to close below R15.55 at some stage for it to regain its strength and claw back some losses. He said there needed to be something “fairly major to happen”, for the dollar to retreat and that this was unlikely in the current economic environment.
“You need the dollar to weaken and that’s unlikely to happen. Domestically there is nothing to turn us around. We are close to negative growth as a country,” he said.
BUSINESS REPORT