Rand Weakens to Record Low as Nomura Predicts More Losses

  • Currency slid as U.S. jobs growth backed case for rate rise
  • Nomura sees political risk as another factor weighing on rand

South Africa’s rand weakened to a record low against the dollar, leading losses among emerging-market currencies, after a report showed U.S. jobs growth exceeded forecasts, backing the case for the Federal Reserve to continue raising interest rates this year. It also dropped to an all-time low versus the euro.

The currency of Africa’s most-industrialized economy slid 1 percent, the most among 24 developing nations, to 16.2232 per dollar, before paring losses to 16.1965 by 5:32 p.m. in Johannesburg. Against the single European currency, the rand tumbled as much as 0.8 percent to 17.6903.

The rand rand may weaken to 19 per dollar by year-end as rising U.S. rates curb investment in emerging markets and political uncertainty increases the risk of holding the nation’s assets, according to Nomura International Plc. The rand declined 25 percent in 2015, with losses accelerating in December after President Jacob Zuma unexpectedly fired his finance minister, only to backtrack on the appointment days later.

The “negative risk shock” that resulted from Zuma’s decision was larger than the effect of the 2008 financial crisis, and is still weighing on the currency, Nomura’s London-based economist Peter Attard Montalto said in an e-mailed note on Friday. Other risks facing the rand are “grinding capital outflows” from domestic retail and institutional investors as well as foreign investors, and a widening current-account deficit, he said.

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