The rand has weakened by around 3.3% to the US dollar in August alone on the back of escalating trade tensions between the US and China.
The rand has traded at its weakest level of R15.11 to the dollar before easing to R15.07 at the close.
The local currency faced further volatility following a scathing review by Moody’s rating agency which questioned Eskom’s financial sustainability and the multi-billion rand bailout from government.
Moody’s is the last of the three major rating agencies which still hold South Africa a notch above junk status.
Chief Investment officer of Makwe Fund Managers, Makwe Masilela says, “Because South Africa is a net importer, this is supposed to be inflationary and worse out of those. I think the biggest chunk comes from oil accounting for 40%. But I think we need to remember that the minute the rand weakens does not necessarily mean that all imports have to go up. Some of these prices you have just work in a three-month kind of a thing. So, it does not mean prices automatically go up. The problem is if it gets to stay like this forever, then we’ll definitely start feeling it.”
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