The SA Rand is tanking against the US Dollar: Here’s WHY
Here’s why the SA Rand is tanking against the US Dollar, and some of the challenges that lie ahead for South Africans.
It’s bad news so far in October on the currency front as the SA Rand is tanking against the US Dollar. Not since June, and suspicions we supplied Russia with weapons, has the SA Rand been tanking this badly against the US Dollar.
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At the time of writing (Thursday 5 October 2023), the SA Rand was trading at R19.50 to 1 US Dollar. This was the fourth straight day of increase, having started from below R19 on Monday this week.
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WHY IS THE SA RAND TANKING AGAINST THE US DOLLAR?
According to reports on Daily FX, buying of the US Dollar surged as speculation that the Federal Reserve will once again hike interest rates made itself known around the globe. It’s believed that if raised, the US will keep them elevated for a substantial period of time, too.
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The Institute for Supply Management (ISM) reported a third straight month of US manufacturing improvement. This, in turn, strengthened economists’ expectations of accelerated growth in the third quarter in the US, said Reuters. Simultaneously, the US Dollar rallied, and US bond yields spiked, creating a catastrophic scenario in financial markets around the world where US profits threatened to impact value everywhere else.
WHAT DOES THIS MEAN FOR SOUTH AFRICANS?
As our financial markets are closely tied to the performance of the US Dollar, many local economists are saying the South African Reserve Bank (SARB) will need to follow suit and hike interest rates, too, at the next time of asking.
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Similarly, this week’s big fuel price increase has raised fears on inflation. The long and the short of it is everyday goods could become increasingly expensive as suppliers try to find ways to absorb costs. So, unless things change markedly on international markets, brace for some food price increases.
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What are you most worried about when the SA Rand is tanking against the US Dollar? Be sure to share your thoughts with our audience in the comments section below. And don’t forget to follow us @TheSANews on Twitter and The South African on Facebook for the latest updates.