- The rand has reached its weakest point of the year as it traded for R15.88 to the dollar this morning
- This follows the nomination of Federal Reserve chair Jerome Powell by President Joe Biden, which begins Powell's second term in the post
- South Africa's economy is affected by international factors, which is why when the dollar strengthens, the rand weakens
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JOHANNESBURG - Earlier today (23 November, 2021) the rand traded at its weakest price for 2021, R15.88 to the dollar. This exchange rate, which was recorded at 8:20am this morning, was 0.19% weaker than when it previously closed.
This is due to the dollar strengthening and US interest rates rising after President Biden nominated Jerome Powell as the chair of the Federal Reserve for a second term.
According to BusinessTech, analysts have been predicting that US interest rates will rise in 2022 and today's events have shown that to be true.
Why the rand weakened
The Reserve Bank raised interest rates by 0.25% last week, which had a ripple effect on the rand's exchange rate. SABC News reports that the weakening of the Turkish lira caused the rand to weaken in sympathy.
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Economies in developing countries are contingent on first-world countries' economic situations. This is why the more the US dollar strengthens, the weaker the rand becomes.
Annabel Bishop, the chief economist for Investec, said that international factors influenced the weakening of the rand because the world has a negative sentiment towards developing countries' economies.
Reactions to weak Rand
"I bet it's President Zuma's fault, isn't it?"
"The main function of the Reserve Bank is to protect the currency. Which one, the rand? No. It weakens daily in front of their eyes, they do nothing."
"At least it fluctuates. Nationalise the Reserve Bank and watch the rand plummet forever."
Food prices will see dramatic hike following fuel price increase
Previously, Briefly News reported that the recent sharp increase in the fuel price has resulted in a proposed rise in food prices before the end of the year. South African consumers are anxious that they won't be able to afford to celebrate the festive season.
Pietermaritzburg Economic Justice and Dignity (PMBEJD), a group advocating for a fair political economy, has warned South Africans that November and December will be financially trying months due to the increase in consumer goods prices.
Fuel is necessary for the transportation and production of food, which is why the fuel price increase will lead to a rise in food prices.