South Africa’s Rand strengthened to an 11-week high against the weaker Dollar today, largely reflecting the greenback’s broad-based weakness and consequently spurring demand for alternatives to the U.S. currency.
The USDZAR hit a low of 6.6692 by 1500GMT , strongest it has been since May 9, compared with Monday’s close at 6.7622.
The Dollar fell against all of its major-traded counterparts after President Barack Obama warned in his speech on Monday of a “deep economic crisis” without a compromise to avert an Aug. 2 default.
“Market fears over the U.S. debt situation are impacting more on the dollar than risky assets,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, said in a research note. “Global markets remain jittery.”
Meanwhile, Dollar weakness has sent gold to new record highs. Gold and platinum account for 20 percent of South Africa’s export earnings, according to government data. This makes the Rand a commodity-linked currency, thus affected by gold prices.
Also, South Africa’s relatively conservative fiscal and monetary policies are attracting investors to the country’s currency, Tradition Analytics researchers led by Johannesburg-based Quinten Bertenshaw said in a research note.