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The rand is no longer the world’s most volatile currency – but here’s why that won’t last

The rand is no longer the world’s most volatile currency – but here’s why that won’t last

The Turkish lira has replaced the South African Rand as the world’s most volatile currency ending a two-month long reign at the top.

This is due to Turkey having one of the worst external debt profiles in emerging markets, resulting in the country’s corporate sector chasing the weakening currency by buying dollars against Turkey –  exacerbating the depreciation of the lira in the process, said Bloomberg’s Mark Cudmore.

South Africa replaced the Mexican Peso as the world’s most volatile currency on 8 November 2016, following President Jacob Zuma’s ongoing battle with Finance Minister Pravin Gordhan.

The rand has closely tracked with Zuma-related headlines since then, advancing when his position weakened and selling off when Gordhan seemed threatened.

The result has been a real-world measure of the “political risk premium” as investors look to buy and flip the rand within days of one another because of how much the currency can change weekly, said Guillaume Tresca, emerging-market strategist at Credit Agricole SA,

With tensions between Zuma and Gordhan cooling off in the past few weeks, the currency has stabilised some what, allowing the lira to take top place. This will likely be remedied however, as Turkey’s Central Bank looks to hike internal interests rates to remedy the depreciation.

Meanwhile South Africa’s problems could just be beginning as the politiciking carries on into 2017, warned Tresca.

“My concern is that it’s not the end of the story at all, it’s just the beginning.”

“I don’t think that Zuma will do nothing. He will find another way to strike back. The rand will remain very hard to trade.”

Read: Zuma’s economic outlook for 2017 is way off

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  • Brandon van Reenen

    This week: The rand looks good in 2017
    Next week: The rand looks bleak in 2017

    • Hennie

      I am a pessimist. Zuma is going to rock the boat and the rand will weaken.

      • Brian

        I have no doubt about that. Wait for the next attack on Gordhan. So I would call you a realist, not a pessimist.

      • Brian

        I agree. I will almost guarantee it. Why is that manipulating thief still running our country? It is embarrassing and reckless.

    • Mo

      That’s because it’s volatile

      • Brandon van Reenen

        You must be fun at parties

  • Khalsa Singh

    Wow….we are competing neck and neck with a musloid infested war zone.
    Just goes to show that we are in a ”war” with ANC corruption and the battlefield is at the polls

  • Konstabel Koekemoer

    Things have been quiet over the holidays so the Rand managed to claw back some losses but I think it’s the calm before the storm. Soon the Gordhan vs Zuma battle will continue especially before Gordhan’s budget speech next month.

  • Who am i

    People in the western / northern / eastern cape need to realize that South Africa with ZUMA and even after Zuma (because he is really damaging the country now) is doomed. Secession from south africa into the Cape Republic is the only way we can survive. Cut them off.

  • Mo

    Jacob’s new years resolutions :
    1. Speak about the economy more often.
    8. Make ex wife president.
    5. Bury the hatchet with Gordhan … hehehe
    2. Learn to operate the firepool.
    14. Laugh more.

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