The rand tumbled the most since 2011 amid increased concern that the plunge in commodity prices will deepen as China’s economy slows.
Fin24 reports that China is the top destination for South Africa’s raw materials, and the prospect of higher US interest rates will most likely worsen things.
Lower Chinese growth means weaker demand for commodities, as China is world’s largest consumer of raw materials by far.
The rand weakened 3.3% to R13.41 to the US dollar this morning - the most since September 2011.
Data compiled by Bloomberg showed that it fell to R14.07 earlier, the lowest on record, and has dropped 14% this year.
China’s surprise devaluation of its currency on August 11 has roiled global markets and reinforced concern of a steep slowdown in the world’s second-largest economy.
The Bloomberg Commodity Index, which tracks 22 raw materials, slumped to its lowest level since 1999 on Monday morning.
An economist feels the current volatility of the Rand has the potential to hurt business confidence.
FNB's Alex Smith says the weakness is not specific to South Africa, adding that most emerging market economies have been under severe pressure in recent months.
He highlighted Turkey, Russia and Brazil as countries that have all suffered under the current conditions.
Smith says however, a weaker Rand isn't always bad news for everyone:
"I think it is also worth mentioning that there are always winners and losers if the currency moves like this. The mining sector will probably be quite glad if the currency weaken, because they sell their commodities at a $6.00 price so they are getting more rand for their commodities. For other sectors though it has increased costs quite dramatically" he said.
