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Rand gets even stronger as investors warm up to South Africa

Rand gets even stronger as investors warm up to South Africa

The rally in the rand following the US Federal Reserve’s decision to hike rates last week has continued, as investors remain upbeat about South Africa – though some are still very cautious.

On Monday the rand was trading at R12.68 to the US dollar, a stronger position than the R12.72 high it reached on Friday (17 March) after the US Federal Reserve took a decision to hike rates softening the dollar and pushing investors into other markets.

The current levels mark the strongest position of the rand in 20 months, with the currency last hitting those levels in August 2015, subsequently getting battered by a brutal global economy and poor governance locally.

According to analysis done by Bloomberg, sentiment around the rand and its performance over the past 12 months has improved significantly, out-performing over 30 markets.

Meanwhile, risk measures in South Africa – from volatility to credit-default swap prices – are falling, Bloomberg said, and analyst forecasts are at their least bearish (ie most positive) in 18 months.

“The median forecast of analysts in a Bloomberg survey predicts the rand at R13.70 per dollar by the end of the second quarter. While that may seem bearish, the forecast has dropped from R15.83 a year ago. The last time analysts saw the rand below 14 per dollar was in October 2015,” Bloomberg said.

The group pointed out that rand volatility was also at a 15-month low, the risk around a possible credit rating cut is getting lower, and that bond inflows are on an upswing as investors regain their appetite for the South African market.

However it’s not all positive: while investors are hoping for the best, they’re still preparing for the worst, with options to sell the rand versus options to buy climbing by a percentage point – meaning there is an increase in investors hedging against the rand.

This sentiment is not without reason, as some analysts have pointed out that the market is painting an overly positive narrative around South Africa with little data to back it up.

According to research analysts at Nomura, South Africa’s ‘positive story’ in the markets is all wrong, and does not take into account the incredibly volatile political situation – where the economy hangs under an axe of a couple of ill-placed moves by president Jacob Zuma – and the country has shown little in the way of growth, and bringing down unemployment.

Nomura holds a more bearish view of South Africa, expecting the rand to start weakening again as the year progresses, and the country’s politics plays out.

Read: Rand rallies to strongest levels since August 2015

BusinessTech's Staff Writer is directly plugged into the South African Internet backbone, and spits out press releases and other news as they receive it. They are believed to be cl...
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  • Peter the Observer

    Great headline … but really what is there to warm tooo…. here in gangster land??

    • Ecthelion

      It upsets you doesn’t it, that rational business people don’t see the country as the hell your biased eyes see it as?

      • Ominous_hashtag

        Oh, but some of them do, just look at Nomura. If you read the latter parts of the article you will notice there definitely isn’t an absolute consensus; the positive data is lacking so maybe the business people aren’t being so rational after all.

      • Jeffery Stokes

        Funny thing is, it’s usually the people at the bottom of the totem pole that moan about how crap SA is.

    • Mikhael Rowe

      That is Gauteng: GP – Gangster’s Paradise.

  • RodneyVikens

    Great. Now I have to wait till No. 1’s next speech before I can transfer money to my SA account.

    • Fanandala

      I am transfering my spare money out while the going is good. I doubt it will get much better than that.

  • So will Dstv drop prices now. They are killing my sister, she doesn’t want to cancel!!!!!!!! And the only channel she watches is Telemondo, yeah really! And Multichoice doesn’t want to offer her a choice to choose!!!

    • Fanandala

      They are not killing your sister. She must take responsibility for her suicide.

  • Joe Black

    Well I’m very happy. A stronger Rand might negatively influence exporters (ours are heavily protected usually at the taxpayer’s and consumer’s expense), but it’s great for the man on the street.

    Can’t wait for the price of some imported products to drop.

    • ToothyGrinn

      You seem to forget we were doing just fine on R6 to the Dollar.

      • Joe Black

        Look… I’m happy there’s some strengthening of the Rand. What do you want?

        • ToothyGrinn

          This is hardly strengthening, like I said above, the Rand is not getting stronger, the Dollar is getting weaker.
          That been said, When we get to R6 or R5 then I will be impressed.

          • How are we doing against the £/€?

          • James Brian Fosker

            We are doing great against all currency, not just the dollar.

          • Jacques

            Well, as my ol’ granpa used to say: we can dream whatever we want! LOL

          • Joe Black

            You can check the Dollar-Rand, Pound-Rand and the Euro-Rand. Same pattern. The Rand is strengthening.

          • Jacobus Pienaars

            I guess you will now put your savings in the rand then?

          • Meri

            I agree!

    • Oran Gutan

      The Rand always strengthens this time of the year before it drops precipitously before the start of the European summer. That’s when people are buying foreign currencies to travel overseas.

      And of course that’s when Government potentates and their handlers (Guptas) are taking their money out of the country.

  • ToothyGrinn

    The Rand is not getting stronger…. The dollar is getting weaker.
    Trumps wants to start exporting.

    • James Brian Fosker

      No the rand is getting stronger because it not just the dollar that has come down.

  • Kevin Powels

    Don’t get too excited Zumas foot is never far from his mouth one shuffle and it could all go South

  • errollus

    R15 to the dollar was very good for SA exporters and tourism and introduced a great deal of liquid cash into the country, so desperately needed.
    Saving being virtually impossible, few people had the deposit for a house until the rand weakened and things loosened up; i e that erf you had suddenly found a buyer, or your collection of something sold, etc.
    If the rand goes back too far we will again come to a hopeless standstill.

  • Wari Murphy

    I wonder how much of this improvement is actually due to the exposure of the ‘fiddle’ by major banks. The Big Mac Index placed the true value of the Rand at just under six to the U.S. dollar, while others have placed it at between seven and eight.

    • Jacobus Pienaars

      I don;t thing a few fiddlers at a couple of banks can swing the dollar…..

      • Wari Murphy

        They did, at least a whole group employees did. Citigroup paid a 5.25 million dollar fine. Other banks/financial institutions implicated – Standard, Absa, Barclays, Investec, Nomura, JP Morgan Chase, HSBC, Credit Suisse among others. And since 2007 apparently.

    • Aristophanes

      The Big Mac index is a joke in the first place, and doesn’t refer to Third World basket cases like this one is becoming, in the second. And don’t believe the bůllshît about banks manipulating the exchange rates, it’s mainly a few of their rogue traders tweaking it by a few percent over months and using that to boost their bonuses.

      • Wari Murphy

        According to economists the Rand is undervalued, even factoring in the Chief Thief and Gupta’s influence.

        • Aristophanes

          Which economists? I wouldn’t believe a word an economist says.

          http://economistsview typepad com/economistsview/2017/02/why-all-exchange-rates-are-bad.html

          https://businesstech co za/news/business/123593/the-rand-could-hit-r60-to-the-dollar-by-2019-chris-hart/

  • bengine

    This sounds like a big pile of manipulation to me. It does not make sense. Why are investors up beat – what do they know we don’t. From where I am sitting the bus is doing 80km / hour, the cliff is straight ahead the brakes have been stolen, the steering wheel is locked and the driver is a raving lunatic.

  • Wari Murphy

    ‘Nomura holds a more bearish view of South Africa, expecting the rand to start weakening again as the year progresses, and the country’s politics plays out.’ Weren’t they one of the guilty culprits I mentioned earlier? I have a hard time understanding why South Africans aren’t more outraged about this debacle.

    • Jacobus Pienaars

      Personally I think a sangoma is manipulating it using the fact that Venus is in the power of Jupiter.

  • Jacobus Pienaars

    Yep. Zupta will fark it up.

  • Erlo Muhl

    This should have happened long ago as our Rand is grossly undervalued. But this strengthening of the Rand will be short lived if our government does not stop irrational decisions it takes daily and tries to implement laws that will break any camel’s back.

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