Rand, how weak will it go??

[w1z4rd]

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

Do you also get paid in dollars? One of my revenue streams is dollars

 

[JonnStar]

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

Across the board confirmed

It seems the rand has also weakened against all other currencies I would care to check all coinciding around the 13th May. What is up with that? I suppose it all ties in with the dollar somehow?

 

[noxibox]

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

That would simply do other damage.

 

[Jehosefat]

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.

Thank you for proving my point.

The interest rate parity theory implies that the expected return on domestic assets will equal the exchange rate-adjusted expected return on foreign currency assets. Therefore, if the domestic interest rate is higher than the foreign interest rate, the domestic currency is expected to depreciate against the foreign currency.

So as long as our interest rate is higher than the US interest rate (which it is, quite significantly. The Repo Rate here is 5% and the equivalent rate in the US, the Federal Funds rate, is 0.12%) the Rand is expected to depreciate against the Dollar. Any increase in our interest rate would only increase the expected depreciation.

 

[noxibox]

Shouldn't that be the interest rate adjusted for inflation?

 

[Jola]

That would simply do other damage.

That has already been done by having interest rates too low for too long.

SA doesn't work on low interest rates, inflation shoots up and people borrow too much.

And, as we are now seeing, the currency goes to hell.

 

[Jola]

So as long as our interest rate is higher than the US interest rate (which it is, quite significantly. The Repo Rate here is 5% and the equivalent rate in the US, the Federal Funds rate, is 0.12%) the Rand is expected to depreciate against the Dollar. Any increase in our interest rate would only increase the expected depreciation.

Nope, you got that wrong.

Also the comment re inflation is relevant, with inflation shooting up here the currency will weaken (Purchasing Power Parity) and that will require higher interest rates to get that under control.

 

[Jehosefat]

Nope, you got that wrong.

Also the comment re inflation is relevant, with inflation shooting up here the currency will weaken (Purchasing Power Parity) and that will require higher interest rates to get that under control.

Care to elaborate? I'm very interested to hear why that theory is wrong.

And I've already addressed why increasing the interest rates will have very limited impact on inflation in the short to medium term due the the majority of the inflationary pressure being cost-push rather than demand-pull.

 

[lloll84]

$1=R10 now.

 

[lloll84]

Rand hits 10 to USD after Zuma's speech today.

He said " I don't think we should take strikes as a problem."

I say , WTF???????????????????