The rand tanked more than 2% on Tuesday afternoon after US retail sales showed a rise of 0.3% during the month of April.
“This has caused the USD to continue its gains against its peers and is currently trading at 12.60 against the ZAR and 1.1850 against the EUR,” TreasuryONE said in a snapnote.
By 15:21 the local unit was trading at a four-month low of R12.62 to the greenback, 2.35% weaker than its previous overnight close in New York.
Earlier on in the session the rand was still changing hands at R12.32/$.
Bloomberg reports the value of sales increased 0.3% in April, matching the median forecast, after a 0.8% advance in the prior month that was stronger than initially reported.
TreasuryONE said this, along with higher crude prices – currently at $79/barrel – had stirred fears that inflation in the US might rise faster during the course of 2018 than what was forecast by the Federal Reserve.
“At the moment bulls still believe that a firmer USD is obtainable because of the interest rate differential,” Umkhulu Consulting’s Adam Phillips commented.
The local unemployment figures released on Tuesday remain fairly stable, “so we are not seeing movement because of a data release, but rather as a result of a market correction”, said Peregrine’s Bianca Botes.
“There are many rumours in the market that the local currency’s weakening is significantly driven by ongoing wage negotiations in the public sector, as government employees are demanding 12% wage increases while the government is only offering 6%.
“However, some weakening in the rand was also to be anticipated following the overreaction seen earlier in the week on the back of an emerging market rally,” she added.