Johannesburg and Cape Town - The rand briefly touched a record low of R8,18 to the dollar yesterday, following continued strength of the US currency against all major currencies, including the euro. The euro, South Africa's main trading partners' currency, weakened to its lowest level to the dollar in two weeks at 87,50 US cents.
Introducing a more sober view, Luke Shearer, the director of foreign exchange trading at Standard Corporate Merchant Bank, noted that the rand eventually settled at the previous day's closing level of R8,13. He added that any value between R8,15 and R8,20 showed a relatively strong performance by the rand since the local currency suffered less than other currencies. It also held to stronger levels against the euro and the British pound.
Traders and treasury economists still maintained their view that the previous day's slide was due to dollar strength rather than speculation inspired by the PAC's allegations that top government officials were involved in corruption in the award of arms contracts. They did, however, agree that rumours about the involvement of key government staff in the alleged corruption had had an influence on market sentiment.
This week, Maria Ramos, the director-general of Treasury, lashed out at what she called "complete and utter madness" as allegations by the PAC, according to her, fed the rumour mill and led to speculators attacking the rand.
Ramos' allegations have once again raised questions about whether the National Treasury or the Reserve Bank should, or could, take punitive action against the speculators. But economists yesterday said this would be very difficult unless the International Monetary Fund radically changed the rules of the foreign currency game, which was unlikely, or if governments insisted that certain codes of conduct be signed by international financial institutions that did business with them and got "insider" information.
Tito Mboweni, the governor of the Reserve Bank, last month told Parliament that the authorities might be forced to take action against financial institutions which speculated heavily against the rand.