By Hlengiwe Ndlovu | 2018-10-16
THE lilangeni briefly hit the E15/$ mark last week following the cloud of uncertainty which hovered over former South African Minister of Finance Nhlanhla Nene being linked with the Gupta brothers.
Markets demonstrated uneasiness on Wednesday between the time of his resignation and the announcement of his replacement in former SARB Governor Tito Mboweni.
SARB is the South African Reserve Bank.
The local currency, which is pegged to the South African rand on a one-on-one basis, stabilised immediately Mboweni was announced as new minister and settled in the E14.5 /$ region.
The Central Bank of Eswatini (CBE) admits in its Recent Economic Developments report that the lilangeni’s performance is subject to political and economic developments in South Africa and developed economies.
Giving a review of the local currency’s performance in September, the report shows that the lilangeni/rand exchange rate depreciated further against major currencies in this month compared to August when it weakened by 5.1 per cent, to average E14.78 against the US dollar.
The Central Bank attributes lilangeni’s fall in September to a combination of domestic and external factors, one of which was the recession stricken economy of South Africa with lower inflation which forced the Reserve Bank to keep the interest rates unchanged at 6.5 per cent.
In the same month, the US Federal Reserve Bank policy took a decision to hike interest rates from between 1.75 and two per cent to between two and 2.25 per cent, leaving currencies for emerging markets exposed to losses due to rising US bond yields, hence the depreciation.
cushioned
“The rand was somewhat cushioned by the South African president’s announcement of a stimulus package aimed at boosting the economy,” the Central Bank noted.
Against other currencies, the lilangeni depreciated by 6.6 per cent to average E19.30 against the pound sterling and by 6.1 per cent to average E17.24 against the euro compared to the previous month.
During the same month, the lilangeni recorded weaker exchange rates against the major currencies and ended the month at E14.11 to the US dollar, E18.
“The performance of the lilangeni is subjected to economic and political developments in South Africa and developed economies.
“As markets wait in anticipation of the expropriation of land without compensation developments in South Africa, the rand also depends on the outcome of the economy stimulus package and Moody’s review of South Africa’s credit ratings in October 2018,” the Central Bank said, also adding that expectations of higher economic growth and further interest rate hike in the US will continue to put the local currency under pressure 45 to the pound sterling and E16.41 to the euro.
The rand, which opened on R14.50/$ yesterday, was trading at 1.03 per cent stronger by the afternoon.
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