The rand has broken through R15 to the US dollar – the first time the rand has traded at these levels since December 2015.
The rand saw one of its biggest declines in history in December after President Jacob Zuma fired former finance minister Nhlanhla Nene.
The currency showed another sharp decline after Finance Minister Pravin Gordhan delivered his 2016 budget speech on 24 February 2016.
NKC analyst Bart Stemmet said Gordhan did not do enough to stave off a ratings downgrade to junk bond status in the coming months.
Since then, the rand has been volatile – trading as high as R16.14/$ on 16 March, and then strengthening to R14.94/$ today.
The stronger rand is mainly a product of a weaker dollar, which was caused by Federal Reserve chair Janet Yellen’s comments regarding the central bank’s gradual approach to raising interest rates.
“A need for caution is all it took from Janet Yellen in a speech last night to see the rand move back below 15.20,” said Umkhulu Consulting’s Adam Phillips.
Yellen highlighted the lower oil price and slower global growth, which “was all operators needed to push the dollar lower against the majors”.
“The chances of a hike in the US before the first (half) of 2016 has dropped to below 25% now,” according to TreasuryOne. “US treasury 10Y yields also dropped below 1.80% overnight. This has caused the dollar/rand to gain some momentum ….”
RMB analyst John Cairns said Yellen was “outright dovish in her comments yesterday, saying explicitly that the Fed would ‘proceed cautiously’ with rate hikes, while arguing that ‘it is too early to tell if this recent faster pace [of core inflation] will prove durable’.
“Market expectations of hikes have shifted back accordingly.”
The chart below shows the rand’s strengthening against the US dollar over the last 24 hours.