South Africa’s rand tumbles to all-time low

South Africa’s rand plunged to an all-time low on Monday, breaching 14 to the dollar on the back of a global drop in commodity prices.

The currency of the continent’s most developed economy tumbled to 14.0682 against the greenback before midday, an 8.5 percent drop, before it pulled back to 13.33 by mid-afternoon.

The currency has been under sustained pressure lately and is one of the worst hit out of 25 emerging market peers as jittery investors dispose of high-risk assets in the wake of slowing economic growth in China.

South Africa’s central bank issued a statement saying it would consider intervening in the foreign exchange market “to ensure orderly market conditions”.

“Developments in South African markets in recent days are largely a response to external factors,” it added.

“This is an emerging market risk event,” said Nedbank economist Isaac Matshego.

“Currencies of other emerging markets are under pressure too, but the volatility that we saw this morning was a bit overdone.”

The rand is likely to remain under pressure as long as global factors are unfavourable, economists warn.

“What’s happening at the moment is basically due to world factors, very little to do with the domestic economy although domestic fundamentals are not supportive either,” said Matshego.

The currency movement is likely to push inflation up beyond the South Africa’s six percent target ceiling, as the country struggles with low growth and high unemployment.