The Rand is no stranger to adversity but the past two days have been nothing short of brutal, and while no clear reason can be pinpointed it looks like a misunderstanding could be the cause of our aggressive selloff.  

These are the mid rates at 6:15 today:

USD = R18.87 AUD = R12.77
GBP = R23.80 DXY = 101.45
EUR = R20.70Brent Crude = $77.10 per barrel

Sensitive viewers look away now, the following exchange rate could be disturbing to some.  The Rand fell to R18.91 to the Dollar yesterday, our worst level since the height of the COVID panic in 2020, and suddenly our sideways drift for weeks in the R18.30’s seems like a million miles away.  

The Rand is imploding all on its own with our fellow emerging market currencies mostly gaining on the Dollar yesterday thanks to a weaker Dollar Index.  And we haven’t just taken a little backwards step either, our fall has been precipitous with our Dollar rate trading at R18.29 on Monday but plunging to R18.91 by yesterday, a 62c fall at -3.4% in three days.  Ostensibly nothing has really changed other than Eskom confirming on Tuesday that there will be a 45 day delay in bringing Koeberg’s Unit 1 back online, but this only amounts to 920Mw, or roughly 1 stage of load shedding.  Our significant move weaker seems like an over reaction and there are suggestions that inaccurate reports on Eskom losing control of the grid could be to blame.

The following is from MoneyWeb:  The Rand plunged to a three-year low on Wednesday after a steep drop in the previous day, while international and domestic government bonds also fell, as fears grew of scheduled blackouts known as load shedding worsening during winter. “SA bonds and the ZAR are underperforming their EM counterparts this morning,” Kieran Siney of ETM Analytics said in emailed comments. ETM Analytics said in a separate note on Wednesday morning that misleading headlines on Tuesday had sparked the market rout by giving “the impression that (Eskom) was losing control of the grid. SA is in trouble, the grid is under pressure, Eskom does face multiple threats, but none of this is anything new,” it said.

The Rand has given up a lot of ground over the past two days, ground that will be difficult to make up until we get some positive news out of Eskom by the sounds of things, but at least we are not taking a double hit thanks to the Dollar also falling onto the back foot.

The dollar remained stable against a basket of currencies on Wednesday as data showed inflation slowed slightly more than expected last month but gave traders little clarity on the U.S. monetary policy outlook. A U.S. Labor Department report on Wednesday showed the annual increase in consumer prices dipped below 5% in April for the first time in two years. An inflation measure closely watched by the Federal Reserve also subsided, which could provide incentive for the central bank to pause further interest rate hikes next month. The Fed’s Barkin stated “Inflation still ‘stubbornly high’ and isn’t easing fast enough toward the Federal Reserve’s 2% target. In an interview, Tom Barkin, president of the Federal Reserve Bank of Richmond, said he is also seeing some signs that banks in his region which includes Virginia, North Carolina, South Carolina and West Virginia are slowing their lending. It isn’t yet clear, he said, what consequences that trend might have on the economy and inflation. For now, Barkin said, inflation remains unacceptably high.

The US federal government’s budget surplus for April was down 43% from a year ago, thanks to a slide in tax revenues for the month that annual household filings are due. For the first seven months of the fiscal year, the budget deficit hit $924.5 billion, more than double the same period of 2022, according to budget figures released Wednesday by the Treasury Department. Weaker revenues including diminished transfers from the Federal Reserve and bigger outlays for interest on the public debt, education and Social Security are among factors that propelled the widening.

Finance ministers and central bank governors from the world’s wealthiest nations gather in Japan this week with a growing list of urgent issues to discuss, from the risk of more bank failures and the need for debt restructuring to the threat of a US default. While recent Group of 20 finance minister meetings have struggled for consensus due to divisions over Russia’s invasion of Ukraine, the Group of Seven, comprising the US, UK, Germany, France, Italy, Japan and Canada, has proved to be a more coordinated coalition.