South African Rand plunged to its lowest levels, seen last in October 2020. The new omicron virus scare brought a drop in currency value across global markets.
South African Rand Plunges to October 2020 Levels
The South African Rand slipped to 16.36 against the US Dollar, moving to low levels reached in October 2020.
The Rand weakened against the Dollar on the news about the covid-19 variant originating in the country. However, after the initial knee-jerk slide, the Rand shows signs of recovery. The travel ban imposed from neighboring countries contributed to weakness in the Rand against the US Dollar.
The Rand recovered from the sharp slump seen in the currency last week. It was trading at 15.97 levels on the foreign exchange market during trading hours on Tuesday, November 30, 2021.
Travel Restriction To and From South Africa
The US Dollar to the South African Rand slumped to 16.36 last week when officials detected the new variant of the virus. However, the USD/ZAR currency pair saw a mild recovery on the forex market this week after the initial jitters over the covid came down.
The worst-hit sector was the hospitality and tourism sector. Many countries brought a ban on tourism to South Africa. However, domestic tourism remains unaffected, say authorities. It brought some hope to the Johannesburg Stock Exchange on Monday, after a sharp decline last week. The Johannesburg Stock Exchange sank to new lows, with the covid variant victims increasing in the country.
The fourth wave brought by the B.1.1.529 covid variant has unusual mutations, raising alarm bells in the country. The new coronavirus variant Omicron is a variant of concern, says WHO.
South Africa at Lowest Lockdown Strategy
South African President Cyril Ramaphosa did not impose any restrictions in the country. He said that during the previous covid wave, vaccines were not widely available. Now, more people are vaccinated, and the vaccination drive has been stepped up to protect more people, he said in a national broadcast. Ramaphosa has made vaccination compulsory so that more people can get the vaccines.
The EU and the UK were the first countries to tighten border restrictions on South Africa. Scientists claim that the mutation affects even those who received the vaccination, though it lacks scientific reports.
Ramaphosa asks global countries to roll back travel bans from South Africa. Travel restrictions will bring more harm to countries across the globe, just when they are showing signs of recovery.
At the G20 meeting, countries pledged to bring an easing in travel, safely and systematically. Countries resolved to bring a sustainable recovery to the travel and tourism sector at the G20 summit held in Rome. But the current infection brought an immediate travel ban from most countries, despite the pledge taken at the G20 summit meeting.
Central Bank SARB Hikes Rates
The South African Reserve Bank hiked rates for the first time after three years, as inflation concerns increased. A hike in interest rates by 25 basis points brings it slightly above record lows.
Household expenses have risen, affecting every ordinary household. The economy is facing slow growth and requires immediate reforms to meet the demands of the country. Education and employment are some sectors in which the country lags behind other countries.
Lesetja Kganyago, the governor of the central bank of South Africa, raised rates by 0.25% amid increasing inflation.
The central bank rolled back rates by 275 basis points since the start of the Covid pandemic. But, inflation fears cause worry among authorities. Crude and energy prices are the chief cause of the rising inflation, says Governor Kganyago.
South Africa Falls After a Rebound
South Africa saw a slight rebound in the third quarter of 2021. The manufacturing sector expanded for the quarter ended September 2021. Shortage of supplies is slowing down the production sector, especially in the metal industry.
Political corruption and increasing unemployment are other causes of worry to the people. GDP growth in 2022 may slow down, say experts.
The current account surplus remains high at 343 billion Rand. Exports have gone up, and the country shows a strong trade account.
Global Currencies Slide Amid Corona Fears
The US Dollar Index reached 16-month high levels at 96.90 levels. However, the corona new variant scare caused a sudden slump to the US Dollar Index. It slid to 95.44 during trading hours on Tuesday, November 30. The US Dollar Index shows weakness with raising concerns about the covid variant.
The Australian Dollar to the greenback slid to a 12-month low, to levels last seen in November 2020.
The Euro to US Dollar Index slumped to a 16-month low as corona fear increases.
The GBP/USD exchange pair moved lower, towards the December 2020 levels.