The ZAR Exchange Rate Thread

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Arthur said:
I make regular payments. And I have absolutely no idea how hedging with currency futures works. I have a 5 day window every month in which to make payments.
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Very simply, it's just a method of offsetting. The gain or loss you make on the actual forex transaction is offset by the equivalent gain or loss on the future contract.

Simple example:

1. Buy $1000 worth of ZAR/$ futures at rate of R12/$.
2. A while later you need to pay US vendor $1000 but rate is now R12.20/$
3. Because the rate has worsened your dollars cost R200 more.
4. Sell the future for a profit of R200

You hedge your risk by 'fixing' the rate @ R12/$. The essence is that you have to live with the rate you lock in at: you won't benefit from rate improvements, but more importantly you won't be negatively impacted by a worsened rate.

See the hedging example on page 10 of https://www.jse.co.za/content/JSEBrochureItems/JSE Currency Futures Brochure.pdf

Obviously you will have minor brokerage and sundry fees, but for large transactions you will drastically reduce your risk.
 
Diplos said:
Very simply, it's just a method of offsetting. The gain or loss you make on the actual forex transaction is offset by the equivalent gain or loss on the future contract.

Simple example:

1. Buy $1000 worth of ZAR/$ futures at rate of R12/$.
2. A while later you need to pay US vendor $1000 but rate is now R12.20/$
3. Because the rate has worsened your dollars cost R200 more.
4. Sell the future for a profit of R200

You hedge your risk by 'fixing' the rate @ R12/$. The essence is that you have to live with the rate you lock in at: you won't benefit from rate improvements, but more importantly you won't be negatively impacted by a worsened rate.

See the hedging example on page 10 of https://www.jse.co.za/content/JSEBrochureItems/JSE Currency Futures Brochure.pdf

Obviously you will have minor brokerage and sundry fees, but for large transactions you will drastically reduce your risk.
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I am working in a country where we dont have hedging as an option, really would make life easier. In an econonomy like RSA(at the moment) where you can be relatively certain that things will not be getting better within the next three year I think hedging will save you a pretty penny over the long term. Good solid advice.
 
CharlieM said:
I am working in a country where we dont have hedging as an option, really would make life easier. In an econonomy like RSA(at the moment) where you can be relatively certain that things will not be getting better within the next three year I think hedging will save you a pretty penny over the long term. Good solid advice.
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I looked at this, but I'm finding it hard to think this will continue, I think our currency is also being artificially weakened.

Can it realistically get much worse sure we must bounce back at some point?
 
Thor187 said:
I looked at this, but I'm finding it hard to think this will continue, I think our currency is also being artificially weakened.

Can it realistically get much worse sure we must bounce back at some point?
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I believe it will get worse. We offer nothing that the world wants.
When the fed increases rates, the rand will slide further, so for now, its only heading one way ... unless we come up with some miracle for our energy crisis that does not increase input costs
 
Thor187 said:
I think our currency is also being artificially weakened.
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How? Our currency is not pegged to another at a set rate. the Rand is a free float currency as far as I know. Also, SARB has made it clear they are not charged with protecting the Rand or keeping it at a certain level. The market will determine the value of the Rand. Their mandate is to keep inflation within a certain range. So when they do react then it is due to the Rand causing inflation to go up.
 
Ockie said:
How? Our currency is not pegged to another at a set rate. the Rand is a free float currency as far as I know. Also, SARB has made it clear they are not charged with protecting the Rand or keeping it at a certain level. The market will determine the value of the Rand. Their mandate is to keep inflation within a certain range. So when they do react then it is due to the Rand causing inflation to go up.
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There are other factors that can artificially weaken a currency. It's value is supposed to be determined by economic factors alone but that is not how it works in reality. Our rand is really worth about R7 to the dollar.
 
Arthur said:
To whom? The market says today that it'll cost you R13.15 to buy a dollar. What other possible measure can there be?
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A realistic one. The current one is all based on stupid things politicians do and say.
 
Swa said:
A realistic one. The current one is all based on stupid things politicians do and say.
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My friend Swa. I've got a great deal for you. I will sell you pounds at a realistic 30 zar each. I also guarantee that my price is not "based on stupid things politicians do and say". Basically a steal. What do you say?
 
HavocXphere said:
My friend Swa. I've got a great deal for you. I will sell you pounds at a realistic 30 zar each. I also guarantee that my price is not "based on stupid things politicians do and say". Basically a steal. What do you say?
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Thanks for the laugh.
 
The car I was hoping to buy when it gets launched here is built in the UK, its price is going to be way out of line at this rate with its competition :(
 
remybfg10k said:
Where can you buy dollars for that price? I think he means that actual cost of buying a dollar via bank or Travelex etc.
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ok , thanks.

Conspiracy theories were floating around the office that live feeds get manipulated and delayed according to user hierachy, like cellphone signal availability.
 
I don't own a tinfoil hat but I don't trust anyone when it comes to money so wouldn't be surprised if something dodgy was happening.

I'm trying to see what the best way to take money over would be, been eyeing travelex because they freeze the exchange rate
 
Rand breaches 13 to the dollar for the first time in 14 years

The rand fell nearly 1 percent against the dollar on Thursday, breaching 13.00 for the first time in 14 years as concerns about slowing growth in China weighed on commodity currencies.

The rand touched a session low of 13.0050 to the greenback, its weakest since Dec. 2001 according to Thomson Reuters data.

The JSE was weaker on Thursday morning as it followed global markets lower in the wake of the release of US Federal open market committee (FOMC) meeting minutes on Wednesday night‚ which put a damper on expectations of a rate hike in September.

US officials have signalled for months that they intend to start raising short-term rates before the end of the year‚ but they have provided no clear sign that they will do so at the next policy meeting in September.

Asian markets also pulled back after a weaker close on Wall Street overnight...
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Full Article Here....
http://www.timeslive.co.za/local/20...-to-the-dollar-for-the-first-time-in-14-years
 
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