By Phephile Motau
The South African Rand set a record closing low against the dollar on Friday. The Rand, however, ended far from session lows after officials said the country had not approved any arms shipment to Russia late last year.
According to the Financial Post, the rand was bashed this week by investor concerns over the worst power cuts on record followed by an allegation by the United States (US) that a Russian ship had picked up weapons in South Africa in December.
The Rand recovered from its weakest level ever of R19.51 to the Dollar hit earlier in the day but set a record closing low of R19.33. It fell 4.7 per cent this week, the largest weekly drop in nine months.
Read More: Rand plunges to seven-week low
“The risk of SA being seen to, or actually, collaborating with Russia should not be underestimated,”
Investec Chief Economist Annabel Bishop reportedly said in a research note.
“There could be further substantial Rand weakness if South Africa is proven to have helped Russia, which will heighten inflation amid already worsening power cuts, she said.
U.S. Ambassador to South Africa Reuben Brigety reportedly said he had communicated with Foreign Minister Naledi Pandor on Friday “to correct any misimpressions left by his public remarks” about the Russian ship accusations.
Read More: South African rand recovers after officials say no arms shipment approved to Russia
It was reported that JP Morgan predicted on Friday that South African economic output would contract this year by 0.2 per cent and this would be attributable to rolling blackouts.
The weaker Rand was also adding to unease about high inflation which could keep the South African Reserve Bank hiking interest rates longer than expected.
“The Rand has come under pressure which, at the margin, makes it more likely that the Reserve Bank will hike interest rates further than we expect,” Jason Tuvey, deputy chief emerging market economist at
Capital Economics said in a note.
This could be another challenge for investors and households alike already grappling with high inflation and cost of servicing debt.
