What’s Happening To The Rand?

Apr 19, 2017

On the 30th of March 2017, President Jacob Zuma replaced the Finance Minister, Pravin Gordhan. This decision triggered a rating downgrade to a junk status (a non-investment grade) by Standard & Poor’s and Fitch, two of the three big rating agencies in the world. The downgrade sparked outrage amongst South Africans and inspired protests around our country. But what’s happening to the Rand right now?

On the 12th of April 2017, the rand rallied by 2.7%, gaining 40c against the dollar, and regaining almost a third of its losses since the former finance minister was fired. This news surprised currency analysts, as it indicates that the Rand has had its best day in six months.

Analysts who have been looking into the Rand’s regained strength explain that about 0.5% of the sharp move was attributed to comments that the American President, Donald Trump, made about the dollar getting “too strong” and that the Federal Reserve should keep interest rates low. Another 0.5% can be attributed to generalised risk gains, while the rest (1.7%) remains a mystery.

Umkhulu Consulting’s Treasury Specialist, Adam Phillips, said that there is no known reason for the Rand regaining its strength against the dollar. “I would like to say that the march in Pretoria and comments by the new Finance Minister, Malusi Gigaba, were the cause of the Rand’s strength, but that is simply not the case. The move might surprise many, but throughout the last two weeks the Rand’s moves have been orderly, proving that positions need to be flexible as international news can affect the currency just as much as local events,” he said.

While currency analysts scratch their heads in wonder, the rest of South Africa can breathe better knowing that the Rand is not at a complete loss, as this could mean that interest rates and inflation won’t further devastate our nation – at least not right now anyway.

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