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See the rand's roller coaster ride

Aug 26 2018 20:45

It is not easy to predict what the rand will do.

Predicting the way the rand will go is like trying to estimate the amount of rainfall in Cape Town next winter, according to Tim Powell, director of Sable International Forex.

He explained that the rand weakened due to being dragged along as part of an emerging market "crisis". SA had no control over this trend. The local currency has weakened by about 15% so far this year against the dollar.

Statements about land expropriation - whether from local politicians or US President Trump - has also not helped the rand's performance.

Furthermore, ratings agency Moody’s said that, while some emerging market countries had seen their currencies weaken against the dollar, and others experienced significant capital outflows, SA had been hit by a one-two punch of both a falling rand and of outflows equities and debt.

“Over the past month, portfolio outflows from South Africa have been the largest, out of those emerging markets tracked by the Institute of International Finance,” it said.

Moody’s currently has South Africa’s long-term sovereign debt at Baa3 – one rung above subprime. The outlook is stable.

The rand ended trade on Friday up 1.17% at R14.15 to the dollar.

Peregrine Treasury Solutions sets out the rand's roller coaster ride as follows:

(Source: Peregrine Treasury Solutions)

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rand  |  dollar  |  markets  |  currencies
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