Rand falls to record overnight low against dollar

The rand fell to its lowest level ever against the dollar in
overnight trade, as global markets reacted to the downgrade of SA’s last remaining
investment grade credit rating to junk by Moody’s.

“The rand has been the worst performing emerging market
currency over the past week and traded at its weakest level ever at R18.05 in
Asia early this morning,” said TreasuryONE in a note to clients on Monday
morning.  “The local currency is 17{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}
weaker over the past month’.

Moody’s on Friday night lowered SA’s sovereign credit rating
to the first rung of noninvestment grade, citing a deterioration in the
country’s fiscal strength, “structurally very weak growth”, and little progress on structural reforms of the economy. 

By 07:50 on Monday the rand had recovered some of its losses to trade at R17.90 to the greenback. According to Bianca Botes of Peregrine Treasury Solutions,
this was due, in part, to China’s central bank unexpectedly cutting interest
rates by 20 basis points, which “assist[ed[ the rand in recovering some of
its earlier losses”.

The local currency’s previous weakest
intraday level was R17.91/$ back in 2016, which was caused by a sharp fall in
the Chinese market, as Fin24 previously reported.