Domestic negative growth and dollar strength beat the rand.
The South African rand dropped to its lowest level in almost three years on Wednesday after the US Federal Reserve signalled room for further rate hikes, while the local economy sits on the edge of recession due to load shedding.
US Federal Reserve Chair Jerome Powell warned on Tuesday that US interest rates might go up even faster and higher than expected to reign in inflation – this was the biggest driver of the rands downfall, said ETM Analytics.The rand’s strength has relied heavily on the dollar losing ground. However, the market is pointing to the opposite as investors take a decidedly risk-off stance, hitting emerging markets.
Data from Stats SA showed that growth metrics for the country are likely to be revised downwards once again as GDP for the final quarter of 2022 declined by 1.3% – more than the majority of economists who predicted a 0.4% decrease. Investor interest in the country remains subdued compared to other emerging market currencies as a result, saidTo add salt to the wound, South Africa would likely be in a technical recession if growth were to contract again this quarter.
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