Currency of South Africa Suffers Fourth Weekly Loss
One of the most developed economies in Africa, South Africa, is seeing its currency decline versus the dollar for the fourth consecutive week. Since a selloff that affected the entire developing market in October, this is the longest losing stretch. The rand has fallen 4.1% this year despite most of its competitors doing well, with Chile’s currency posting gains of nearly 6%.
Low Market Confidence
The lack of market trust, according to Daria Parkhomenko, an FX analyst at RBC Capital Markets, is a result of President Cyril Ramaphosa’s poor and tardy reaction to the unfolding crisis. According to Parkhomenko, a change in market sentiment would strengthen the currency.
Area to Reduce Sales by 5%
As South Africa is expected to assume up to two-thirds of Eskom’s debt later this year, Parkhomenko predicts that the rand might depreciate by roughly 5%. On February 22nd, this agreement may be disclosed in the yearly budget.
persistent energy crisis
Eskom, the state-owned energy provider in South Africa, has enforced power outages for 13 straight months. In response, President Ramaphosa proclaimed a state of emergency and intends to designate a minister in his cabinet to oversee improving the availability of electricity. Parkhomenko cautions that while this may be a start in the right direction, if the crisis develops, the market will have to bear an even higher risk premium. The triple top at about 18.50 might potentially be tested by a more severe downturn.