South African rand value seems all over the place at the moment. Following the ANC power struggle over the weekend, it slid down more than two percent. But on Tuesday morning, September 1, it gained some ground. The volatility of the rand’s not likely to stabilise soon and traders expect a rather wild Yo-Yo ride in weeks to come.
South African rand swings in Yo-Yo like market
BizNews reported that the South African “rand weakened the most in more than two months after President Cyril Ramaphosa had to stave off a leadership challenge from party rivals.” Over the weekend, opposition to curbing “corruption” and possible “economic reforms” rocked the rand. Meanwhile, Bloomberg reminded readers that South Africa lost its last investment-grade credit rating when Moody’s Investors Service downgraded its assessment in March.”
They also noted on Monday, that “outflows reached a record 59 billion rand ($3.5 billion) on Aug. 28.” Now, on Tuesday, the rand recovered a bit once more. But it seems it’s no thanks to anything going in on inside the country. Reuters reported that on Tuesday, the rand gained again. It came after a “weaker U.S. dollar helped the South African rand gain in early trade on Tuesday.”
Rand gains against the US dollar
The outlet cited executive director at Peregrine Treasury Solutions, Bianca Botes as saying, “The dollar …continues to slide in the wake of the newly-announced Federal Reserve policy.” But things seem very unsettled for South Africa. While the power struggle goes on within the ANC, international media picked up on the astonishing accounts that emerge around COVID-19 corruption.
The Times reported that investor confidence teeters as the enormity of the COVID-19 corruption scandal emerges. The massive and influential outlet noted that Tedros Adhanom Ghebreyesus from the WHO equated it to “murder.” He noted, “if health workers work without PPE, we’re risking their lives. So, it’s criminal and it’s murder and it has to stop.”
No wonder traders anticipate some swings in the rand in weeks to come. South African corruption even made it to Fox News. The ripple effects of an unstable economy and corruption are bound to make investors pause. Recall, in 2011, Tanzania’s corruption became so embedded in government circles, that donor countries cut funding pledges to the country.