(Bloomberg) -- The South African rand weakened sharply on Wednesday, sliding to its lowest level in seven months as investors worry about the possibility of sweeping tariffs from US President-elect Donald Trump.
The currency tumbled for a second consecutive session, falling as much as 1.4% — the steepest decline among emerging-market peers tracked by Bloomberg. Over the past two days, the rand has notched its biggest decline since June of last year.
The selloff accelerated around midday in London following a CNN report, according to which Trump is considering declaring a national economic emergency. Such a move could potentially provide legal justification for universal tariffs.
The news rattled global markets, reinforcing the dollar’s strength and driving US bond yields higher — both factors that typically weigh on risk-sensitive assets like the rand.
This week’s moves mark a sharp reversal from the end of last year, when the rand found itself among the five best-performing emerging-market currencies, for the first time in eight years.
The rand’s relative resilience in 2024 was aided by rising investment levels, lower inflation and structural reforms, with a cautious central bank maintaining a favorable interest-rate premium compared with the greenback.
“We believe the rand’s weakness is caused mainly by developments on the US markets — the stronger dollar and higher yields,” said Marek Drimal, a Societe Generale SA strategist in London. “South Africa has been one of the top picks among investors. But amid the broad dollar strength and worries about potential Trump tariffs on global trade, some of them may be giving up,” Drimal said.
Despite the recent setback, Drimal remains optimistic about the currency’s medium-term outlook: “We still believe the rand will be one of the top performers among emerging market currencies in 2025, thanks to elevated nominal and inflation-adjusted yields.”
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