Recent Sterling weakness and the impression the US Federal Reserve will not be raising interest rates in the short term have helped the Rand to make some important inroads into the Pound, will this last? Well with global uncertainty rife and the Chinese economy still looking uncertain it seems probable the South African Rand will come under future selling pressures again.
Unfortunately for the ZAR the South African economy has been very weak with a contraction in the last quarter. Coupled with continued electricity shortages and strikes in the mining sector it is understandable why the currency is suffering. The Rand is driven not just by news in the South African economy but also by investor’s attitudes to risk and sentiments towards the global economy. Investors hold the Rand when they are confident about the global economic outlook and sell when they are not. With little on the horizon to suggest a major return to global confidence further Rand weakness seems likely up ahead.