The rand started out exceptionally well this week but tanked against the US dollar by Friday.
The ZAR was trading at around R17.06 against the dollar at 8.30am on Monday.
This incredible rally did not last long and by Friday morning the rand was trading at around R17.44 to the dollar at 8:30am.
The rand was trading at around R19.23 to the euro and around R22.90 to the pound.
What led to the rand’s downfall?
According to Reuters analysts, the ZAR had strengthened to a 20-month high against the dollar, earlier this week.
Moreover, the rand had buoyed over the last few weeks due to interest rate cuts by the South African Reserve Bank (SARB) and US Federal Reserve (FED) last month.
However, tensions in the Middle East after Iran's ballistic missile attack on Israel have played a role in the rand’s downfall.
"The USD saw strength due to Middle East tensions and strong US labour data, placing pressure on the ZAR," Andre Cilliers, a currency strategist at TreasuryONE said.
There was demand for the dollar after the attacks by Iran as the dollar is seen as a safe haven asset.
Another factor that played a role was the fact that the dollar strengthened against major currencies on Wednesday after the country released its latest data on US unemployment.
The jobs data therefore reinforced the fact that the US FED will not be so expedient to cut interest rates in the coming months.
IOL BUSINESS