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Concern Over the Rand
| News by Staff ReporterAs the eurozone crisis takes a turn for the worse
The South African rand, trading as low as R8.61 to the dollar on Friday, is likely to face an uphill struggle if the eurozone debt crisis is not swiftly resolved, according to Ian Cruickshanks, head of research at Nedbank Capital.This is according to an article on Fin24, which suggests that if European leaders are slow to act in resolving the debt crisis the rand may quickly fall to below R9.
“If it remains at R8.50 within the next few months it could easily fall to R9, with a risk of weakening even further if the European situation worsens,” said Cruickshanks.
The eurozone debt crisis took a turn for the worse last week, according to Fin24, when Germany was unable to sell the government bonds it was offering on auction – usually considered by investors to be a safe haven – and Italy committed to 6.5% to borrow money for six months (about twice last month’s rate).
The dollar and US government bonds on the other hand are still considered by investors as a safe haven, strengthening the dollar against other currencies.
Cruickshanks said since the beginning of the year foreigners have been net sellers of SA shares which up to last Friday totalled R17.4-billion, while during the corresponding period last year foreigners were net buyers of SA shares totalling R29.2-billion.
He added these sales were not, however, reflective of the South African economy but rather of investors steering clear of any risk.
“Investors are looking for a safe place for their capital. They might not receive a big return, but they know that they will at least get their money back,” he said.
Click here to read the article on Fin24.
Source: www.bizpremises.co.za
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