The rand gained some ground against the US dollar and other global currencies after fears that the US may enter a recession.
The rand was trading at around R18.36 to the dollar at 10.45am on Thursday.
Compared to other global currencies, the rand had recovered somewhat and was trading at around R20.10 to the euro and around R23.33 to the pound.
Bloodbath on Monday
The ZAR and a number of South African stocks took a hit on Monday as investors moved away from purchasing riskier assets.
The rand was trading at R18.52 against the dollar at the close of business on Monday.
Casey Sprake, an Investment Analyst at Anchor Capital said that recession fears created a ripple through the global markets.
“At the beginning of the week, fears of a US recession sent shockwaves through global markets, causing steep losses in high-beta emerging market (EM) currencies and equity markets,” she explained.
“While the significant moves in financial markets over the past few days appear somewhat exaggerated, they nonetheless underscore the extreme sensitivity of financial markets to any unfavourable economic data.”
Sprake said that Japan’s Nikkei 225 index plunged 12.4% on Monday and this was its biggest single-day decline since 1987.
She said that investors reacted to rising US unemployment and slower job creation data that was reported on August 2.
“This news suggested an impending economic slowdown in the US, which could spell trouble for Japanese companies. The pessimistic outlook was compounded by a stronger yen, which added to the challenges faced by Japanese exporters,” she added.
Sprake said that on Wall Street, the sell-off began as soon as the US market opened.
“The S&P 500 dropped 4% before recovering some ground, ultimately ending the day 2.7% down - its worst performance since 2022.”
South African assets
Like the international assets, South African assets also plunged on Monday and were caught up in a global sell-off.
These SA assets have staged a recovery, but investment analysts have caution investors that investor sentiment is still fragile.
Andre Cilliers, currency strategist at TreasuryONE told Reuters that investors are currently extremely sensitive to any negative news that could hint at a US recession.
"Currency and commodity markets are keeping within recent ranges ahead of today's US jobless claims number with traders in cautious mode," he noted.
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