Sizing up risks for rand as SA joins rich nations printing money – Wall Street Journal

Central banks in countries like India, SA and Poland have emulated rich nations by launching “quantitative easing” programmes.

Published on:

01 Jul 2020, 7:00 am

The SA Reserve Bank, like central banks around the world, has taken unprecedented action to respond to the devastating economic effects of the Covid-19 pandemic. Measures range from cutting interest rates and granting significant regulatory relief for banks and more recently, several fiscal and tax measures to support households, businesses and ultimately the economy. The Reserve Bank says in its annual report released this week that despite significant turbulence in financial markets, these measures have helped stabilise markets and enabled banks to continue to operate by extending credit to support their customers. And as part of its continuous measures to manage liquidity amid the Covid crisis, the bank bought back over R30bn of SA government bonds in April and May alone, making its bond-buying scheme among the more conservative policies in emerging markets, reports Reuters. But Bloomberg warns that stimulus addiction poses a huge risk for emerging markets. Brendan McKenna, a foreign-exchange strategist at Wells Fargo Securities in New York told the newswire that in the next six to 12 months, South Africa's rand may be among the most at risk given lower policy rates, underlying vulnerabilities and the central bank's quantitative-easing program. – Fadia Salie