Rand, how weak will it go??

[CH2013]

Our rand is sitting at 9.56 to the US dollar today. Bad news for the importers, employers and consumers. Will this likely continue on for the rest of the year?

Confidence on RSA is deteriorating fast I feel like I have to start preparing to save money in a different currency.

 

[Beachless]

I dont have much hope until the election and depending on what happens possibly after that.

 

[Jola]

Confidence on RSA is deteriorating fast I feel like I have to start preparing to save money in a different currency.

Too late ?

I suppose that it depends on how much further it will go ?

Time to start increasing interest rates, a 2% hike will help.

The SARB screwed up by lowering it so much.

 

[zippy]

This should be positive for SA. Makes your exports cheaper and therefore more competitive.

 

[Cius]

The rand is more related to labour relations right now than government. Gill Marcus is actually doing a sterling job. I know plenty of very smart people in the finance industry and they always say SA has a first world financial system in a third world country. The current weakness is in anticipation of massive labour unrest in the mining sector. One of our biggest sources of foreign money is us selling resources on the international markets and when the mines are on strike there is nothing to sell, hence lower demand for Rands. Couple that with investor sentiment causing the rand to dip and there is no telling where it could stop. It depends largely on the unions and if they are dumb enough to continue destroying the livelihoods of those they represent. The only faction that has the power to stop the power of the unions right now is government and for a variety of reasons they are not doing so.

 

[Jola]

This should be positive for SA. Makes your exports cheaper and therefore more competitive.

Dream on ! Life is not that simple !

We are probably heading for an inflationary spiral that will increase costs to the extent that exports will not be cheaper in spite of the FX rate.

But the economy will be stuffed.

 

[Beachless]

The rand is more related to labour relations right now than government. Gill Marcus is actually doing a sterling job. I know plenty of very smart people in the finance industry and they always say SA has a first world financial system in a third world country. The current weakness is in anticipation of massive labour unrest in the mining sector. One of our biggest sources of foreign money is us selling resources on the international markets and when the mines are on strike there is nothing to sell, hence lower demand for Rands. Couple that with investor sentiment causing the rand to dip and there is no telling where it could stop. It depends largely on the unions and if they are dumb enough to continue destroying the livelihoods of those they represent. The only faction that has the power to stop the power of the unions right now is government and for a variety of reasons they are not doing so.

You dont think the socialist laws, the inability to act on social unrest, BEE AA and more under government responsibility has an effect on business and the currency?

 

[Cius]

We are talking about the rand's current weakness. Those issues are all very real and will need to be solved eventually but the current weakness of the rand is all about strikes and forex reserves.

 

[Beachless]

We are talking about the rand's current weakness. Those issues are all very real and will need to be solved eventually but the current weakness of the rand is all about strikes and forex reserves.

So am I if the last strike was handled better and it was easier to retrench staff or fire violent strikers then the threats of reoccurring strikes would have less effect on the economy.

 

[Jehosefat]

Time to start increasing interest rates, a 2% hike will help.

The SARB screwed up by lowering it so much.

How is that going to help? If anything, economic theory suggests that higher interest rates will cause the currency to depreciate faster. And with the current labour unrest issues, the slightly increased yields will probably not produce enough foreign investment inflow to offset this depreciation.

Also, please expand on how the SARB screwed up by lowering rates?

As to your comment on inflation, increasing the interest rate only has an effect on demand/consumption driven inflation. The medium term outlook for inflation is that it is going to be driven by administered prices (electricity hikes) and imported inflation(rand weakness / foreign inflation). Furthermore, with the high household debt to income ratio and the number of over-indebted consumers, raising the interest rate would, in all probability, have a large negative effect on the economy.

 

[patrick]

If we could answer this question we'd be able to make a fortune trading currencies! So I have to say... I don't know...

 

[Jola]

... economic theory suggests that higher interest rates will cause the currency to depreciate faster. ...

I think think you need to start over. No economist ever said that.

 

[SauRoNZA]

Who knows, with Obama coming to visit people might just take notice again and be more positive about it.

 

[Jehosefat]

I think think you need to start over. No economist ever said that.

Yeah, you're right. The Interest Rate Parity theory of exchange rates does not exist... (Nor is it used to price FX derivatives for that matter).

Do you know anything about economics?

 

[JonnStar]

I heard a short while back the dollar was performing exceptionally well, so that is to say the rand hasn't been getting "weaker". I wonder if that is still the case though.

I spoke with a retrenched guy from Gold Fields the other day and his story didn't bode well. And what with all I'm hearing about the mining sector in general I don't feel very confident at all that it will come right.

Not that I don't understand how it works and that things generally see lows and highs. It is just that in this case all I see is a serious amount of investments and capital and infrastructure being pulled away completely along with added unemployment and thus on a side note added crime as well. Now how does that get fixed?

 

[Jola]

Jehosefat : Do you know anything about economics?

You clearly don't, you have everything the wrong way round.

Higher interest rates mean that the currency strengthens. As long as everyone else don't increase their rates.

 

[zippy]

No entrepreneurial spirit ? Just moan moan

South African exporters will be delighted.

 

[Paperweight]

Sorry guys but it's good news for me hope it hits 10 then I'll go on a spending spree

 

[Sherbang]

I heard a short while back the dollar was performing exceptionally well, so that is to say the rand hasn't been getting "weaker". I wonder if that is still the case though.

http://online.wsj.com/article/BT-CO-20130517-706358.html
http://www.bloomberg.com/news/2013-...ce-june-2009-against-dollar-on-boj-moves.html
http://tribune.com.pk/story/550421/currency-rupee-weakens-against-dollar-60/
http://www.bloomberg.com/news/2013-...u-s-dollar-falling-0-2-percent-to-1-3078.html
http://www.globes.co.il/serveen/globes/docview.asp?did=1000845496
http://www.bloomberg.com/news/2013-...-inflation-set-to-fall-to-three-year-low.html
http://www.businessweek.com/news/20...weakens-amid-speculation-fed-to-reduce-easing
http://www.businessweek.com/news/20...rsus-dollar-before-u-dot-k-dot-inflation-data

 

[reactor_sa]

Just give it another month, when the strike season really gets going.... Oh boy, fasten your wallet shu- oh wait that won't help....