The rand is slumping, here’s why – The Wall Street Journal
DUBLIN — Argentina is in the grip of a full-blown currency crisis. Interest rates as high as 60% are not doing anything to arrest the slide of the peso. And now, currency traders are looking around and asking, "Who's next?" The South African rand is one potential answer. This doesn't have anything to do with politics directly (although it's certainly a related matter). The simple fact is that South Africa is vulnerable because it has a lot of debt and a lot of its debt is denominated in dollars. Interest rates in the US are rising, albeit slowly, and the US economy is going gangbusters. That means the dollar is going to get stronger. And that means that South Africa is going to have a tough time paying off its dollar-denominated debt, especially because it has relatively high inflation and low economic growth. All the other issues – expropriation, political appointments etc. – are icing on the cake made of debt, inflation, dollar strength and lacklustre growth. All this is not to say that the rand is doomed, of course. But it seems likely that those who invested in dollar assets a couple of years ago are going to have few complaints in the next year or two. – Felicity Duncan
By Mike Bird and Saumya Vaishampayan
(The Wall Street Journal) The Argentine peso hit a record low and the Turkish lira resumed its slide, dramatizing the strains faced by emerging markets most vulnerable to a rising dollar.
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