The ZAR Exchange Rate Thread

[Bosvark@]

Not a bad recovery considering limited political commitment.

 

[Xarog]

You're a bit late.

It has gone up 0.25% and the currency hardly changed.

I see that.

But the fact of the matter remains that with the interest rate now above zero, loans that were made at 0% now have an interest burden. That means all the people who borrowed dollars for free and bought rands are now going to have to start worrying about paying the interest. Considering the continuing worldwide deflationary spiral, that means that it's going to be harder and harder to get your initial money back. This in turn is going to provoke capital flight from all emerging markets insofar as that "capital" is really just borrowed money. And with it the Rand/Dollar exchange rate is only going to get worse from here on out.

 

[Zyzzyva]

The trend is against us, and it will hurt more and more as they continue increasing the rate, but for now the increase is minor. The market has been preparing itself for quite some time.

Zuma is a far bigger issue.

 

[biometrics]

I see that.

But the fact of the matter remains that with the interest rate now above zero, loans that were made at 0% now have an interest burden. That means all the people who borrowed dollars for free and bought rands are now going to have to start worrying about paying the interest. Considering the continuing worldwide deflationary spiral, that means that it's going to be harder and harder to get your initial money back. This in turn is going to provoke capital flight from all emerging markets insofar as that "capital" is really just borrowed money. And with it the Rand/Dollar exchange rate is only going to get worse from here on out.

Mmm ...



Starting to see the frustration Spizz must have with you (even though you sound like you know what you are talking about).

 

[Xarog]

Mmm ...

View attachment 324763

Starting to see the frustration Spizz must have with you (even though you sound like you know what you are talking about).

So you expect it all to happen instantly?

This process is going to take weeks if not months.

http://www.zerohedge.com/news/2015-...leashing-first-tightening-cycle-over-11-years

The Fed is also raising rates with Junk bonds trading worse that after Lehman...

There's bad debt that could always be funded with more 0% loans. This is not going to work anymore. In order to cover those bad loans, people are going to have to sell things they don't neccessarily want to sell. But people always try to hold on for as long as possible.

 

[Zyzzyva]

So you expect it all to happen instantly?

This process is going to take weeks if not months.

http://www.zerohedge.com/news/2015-...leashing-first-tightening-cycle-over-11-years


There's bad debt that could always be funded with more 0% loans. This is not going to work anymore. In order to cover those bad loans, people are going to have to sell things they don't neccessarily want to sell. But people always try to hold on for as long as possible.

The market can absorbe 0.25%. You are making it sound like they have increased the rate to 15%.

 

[Xarog]

The market can absorbe 0.25%. You are making it sound like they have increased the rate to 15%.

You say it can, I say it won't. Time will tell which of us is correct.

 

[biometrics]

You say it can, I say it won't. Time will tell which of us is correct.

Great argument. You have to wait until I win. Duh.

 

[Xarog]

Great argument. You have to wait until I win. Duh.

I've already stated why it won't. Zyzzva simply contradicted what I said without providing an argument. Ergo there's nothing I have to argue against.

 

[biometrics]

I've already stated why it won't. Zyzzva simply contradicted what I said without providing an argument. Ergo there's nothing I have to argue against.

Whatever. It's going down rapidly.

 

[Grant]

Where getting prices from my sources say 15.89 still

i use this:
http://tradeforexsa.co.za/forex-trading-signals/
leave page open and the various currencies continually auto update

 

[biometrics]

i use this:
http://tradeforexsa.co.za/forex-trading-signals/
leave page open and the various currencies continually auto update

I'm using http://www.investing.com/currencies/usd-zar (click on the 1, default is 15).

 

[Grant]

I'm using http://www.investing.com/currencies/usd-zar (click on the 1, default is 15).

hmm
prefer your one

ta !

 

[biometrics]

hmm
prefer your one

ta !

You can thank a previous post somewhere around here.

 

[Xarog]

http://www.fin24.com/Markets/Currencies/rand-prospects-poor-as-dust-settles-over-zuma-moves-20151216

While it has almost retraced its losses since the political crisis began almost a week ago, it’s also overtaken the Brazilian real as the major currency that options traders are most bearish about.

“We had an overextended slide in the rand and the currency bounced back slightly, but the negative fundamentals are still weighing on the rand and nobody really expects it to bounce back more,” said Win Thin, head of emerging-market strategy at New York-based Brown Brothers Harriman & Co. “In this environment of high volatility and continuous risks, the rand will likely continue to weaken.”

The rand has already tumbled 23% in 2015 amid a rout in the commodities the nation relies on for foreign earnings and the prospect of a US interest rate increase at Wednesday's Federal Reserve meeting.

Traders are paying more to protect against a weaker rand than they are for any other major currency tracked by Bloomberg. The extra cost for options to sell the rand versus the dollar over contracts to buy surged 2.2 percentage points from December 9-11 to 4.9, before retracing to 3.8, three-month risk-reversal prices show.

http://www.zerohedge.com/news/2015-...1-trillion-liquidity-push-rates-25-bps-higher
http://www.zerohedge.com/news/2015-...lowest-2012-factory-orders-collapse-2009-lows
http://www.zerohedge.com/news/2015-12-16/baltic-dry-crashes-new-record-low-china-demand-collapsing

Commodity prices are crashing, economies are siezing up and now the debt overhead just got increased at a time when the inability of the system to expand any further because of the heavy debt burden is causing economic contraction. People are going to pull their money out of SA and it's going to hurt the exchange rate.

 

[icyrus]

Great argument. You have to wait until I win. Duh.

That is the great thing about Zerohedge doom prophets - they predict doom at every turn but ignore all the misses. Doom is always around the next corner.

 

[Swa]

That is the great thing about Zerohedge doom prophets - they predict doom at every turn but ignore all the misses. Doom is always around the next corner.

It was already factored in, which is why the rand has been plummeting the last few months in anticipation. Now the SARB just has to raise our own rates over the coming months to stabilise it even further. Won't be surprised if it's at R10/$ somewhere Q3/Q4 2016.

 

[Xarog]

That is the great thing about Zerohedge doom prophets - they predict doom at every turn but ignore all the misses. Doom is always around the next corner.

So you think because it's not humanly possible to say exactly how many straws it will take to break a camel's back, it is similarly ridiculous to say that adding straws to a camel's back is going to cause its back to eventually break?

Because that's the ZH argument you so dislike. In theory you can always add more debt to the system. In practice, there are limits, even if no one can say exactly where those limits lie.

And no one has done anything about the debt since 2006/2007, the problem was paid forward to avoid the entire financial system imploding, but the only thing that has happened is that the bubble has grown even larger. The reason the EU is now sitting with negative interest rates is a very real consequence of the bubble deflating. The falling commodity prices likewise.

 

[icyrus]

So you think because it's not humanly possible to say exactly how many straws it will take to break a camel's back, it is similarly ridiculous to say that adding straws to a camel's back is going to cause its back to eventually break?

I like your analogy precisely because it is possible to know exactly how many straws will break the camels back and describe exactly how and why it will happen. Zerohedge is more like Chicken Little, the sky is perpetually falling but can't really say why, when or how.

The bottom line is you find their line of thought compelling and I have no interest in trying to change your mind. For me, I will just say what I said to the peak oil alarmists from all those years ago - let's see how this one plays out.

 

[Xarog]

I like your analogy precisely because it is possible to know exactly how many straws will break the camels back and describe exactly how and why it will happen.

No, it isn't. You'd have to know exactly how strong the back muscles of the camel is. I don't know of a scientific way to measure that before the camel's back is actually broken, and it also stands to reason that the point when the camel's back breaks will also depend just how hard it's flexing those muscles.

Similarly, no one can read the global markets with absolute certainty.

Zerohedge is more like Chicken Little, the sky is perpetually falling but can't really say why, when or how.

They've said exactly why it's falling; the QE programs instituted by central banks around the world have covered up the debt problem but not solved it. All they've done is kick the can down the road and they continue to do so at every turn, but eventually it will become impossible to pay the overhead on that debt and the system is going to collapse. It's inevitable. There is simply no way to pay back all the debt that's sloshing around all over the planet.

The bottom line is you find their line of thought compelling and I have no interest in trying to change your mind. For me, I will just say what I said to the peak oil alarmists from all those years ago - let's see how this one plays out.

Those that made the predictions about the collapse that happened in 2007/2008 made exactly the same arguments and for the same reasons regarding bad debts that forms the basis of the ZH argument today. Most economic experts, however, were utterly caught by surprise and voiced chicken little sentiments like you do. I considered the arguments about the sub-prime debt to be solid back as far as 2004 when most Americans were still living the dream on their 2nd mortgages. Similarly I consider the same arguments valid today for the same reasons and the rampant worldwide deflation that is currently being experienced is exactly the kind of thing they predict.

But as you say, time will tell.