The rand fell by more than 1% on Monday and is still trading at a lower level on Tuesday morning, at R17.60 to the US dollar.
This is consistent with weakness in other emerging market currencies as a result of a stronger dollar.
The dollar’s strength can be explained in part by the expectation that US interest rates will continue to rise in order to combat the highest inflation in around 40 years.
As a result, the dollar is appealing as a safe haven currency, as evidenced by inflows into US treasuries and rising treasury yields.
In addition to the dollar’s strength, Eskom’s ongoing rolling blackouts and inability to deliver the electricity required to grow South Africa’s economy are causing foreign currency outflows.
This is also contributing to the rand’s depreciation against a basket of major currencies.