The ZAR Exchange Rate Thread

itsme2

Senior Member
Joined
Sep 25, 2018
Messages
799
Crazy to see the $ plummeting like this against the Rand. Anyone know the cause of this, and where's the bottom?
 

cr@zydude

Executive Member
Joined
Jul 20, 2008
Messages
8,341
Crazy to see the $ plummeting like this against the Rand. Anyone know the cause of this, and where's the bottom?

Safe haven demand is fading now the Biden transition is clearer and people are betting on COID-19 vaccines.

Gold and US dollars* are often held as safe havens, and now they are being sold off. That's why gold and DXY are both down.

*Non-American's tend to buy US dollars as a safe haven, Americans tend to buy Japanese yen and Swiss francs.
 

krycor

Honorary Master
Joined
Aug 4, 2005
Messages
16,837
Something to think about..

In 2020 alone, the U.S. has created 22% of all the USD issued since the birth of the nation. The U.S. Federal Reserve has printed massive amounts of funds in 2020 and bailed out Wall Street's special interests during the last seven months.


While they are the reserve currency, the impact of doing the above is lessened but I’d argue that the net result will be the same.. ie indirect inflation be it via jobs destruction or value destruction. It’s coming and their time as a reserve is gonna end.

This is part of the reason why rand albeit sluggish isn’t depreciating as much as it would.. ie the benchmark itself is in decline which seems perpetual as being the bench mark the lag is the only gain.

End of the day they need to decide what kind of economy they want to be.. advanced or developing. You can’t have it all especially while being the reserve.

On the SA front, just be glad most of the debt is in Rands. If you loom at the defaulter nations, they all had dollar denominated debt which itself is an issue when the game rigged against you from trade to very currency of debt. Ie SA has a longer path to default and the current weakness is part gov & part private sector investment strike. <— simply saying it’s all gov doing is either the person being stupid or nefarious/disingenuous.

My question remains the same though, we’ve have near a decade of disinvestment by some big players locally.. are they happy losing it all? Because we getting close to the brink and while Zuma’s time expired, unlike with the apartheid gov.. I don’t see the anc changing because of it fiscal or monetary issues. Instead a more appropriate faction was supported which is bringing some reform.


So yah.. think on that while we wonder how expensive the dollar equiv will be next year.(because the dollar is in for a battering next year given senate, student debt, evictions, corp property loss etc and only debate is how they will tackle it when interest rate already near 0)
 
Last edited:

johnjm

Expert Member
Joined
Jul 26, 2005
Messages
2,100
Something to think about..




While they are the reserve currency, the impact of doing the above is lessened but I’d argue that the net result will be the same.. ie indirect inflation be it via jobs destruction or value destruction. It’s coming and their time as a reserve is gonna end.

This is part of the reason why rand albeit sluggish isn’t depreciating as much as it would.. ie the benchmark itself is in decline which seems perpetual as being the bench mark the lag is the only gain.

End of the day they need to decide what kind of economy they want to be.. advanced or developing. You can’t have it all especially while being the reserve.

On the SA front, just be glad most of the debt is in Rands. If you loom at the defaulter nations, they all had dollar denominated debt which itself is an issue when the game rigged against you from trade to very currency of debt. Ie SA has a longer path to default and the current weakness is part gov & part private sector investment strike. disingenuous.

My question remains the same though, we’ve have near a decade of disinvestment by some big players locally.. are they happy losing it all? Because we getting close to the brink and while Zuma’s time expired, unlike with the apartheid gov.. I don’t see the anc changing because of it fiscal or monetary issues. Instead a more appropriate faction was supported which is bringing some reform.


So yah.. think on that while we wonder how expensive the dollar equiv will be next year.(because the dollar is in for a battering next year given senate, student debt, evictions, corp property loss etc and only debate is how they will tackle it when interest rate already near 0)

One needs to corroborate that. Unlikely.
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
28,138
Something to think about..




While they are the reserve currency, the impact of doing the above is lessened but I’d argue that the net result will be the same.. ie indirect inflation be it via jobs destruction or value destruction. It’s coming and their time as a reserve is gonna end.

This is part of the reason why rand albeit sluggish isn’t depreciating as much as it would.. ie the benchmark itself is in decline which seems perpetual as being the bench mark the lag is the only gain.

End of the day they need to decide what kind of economy they want to be.. advanced or developing. You can’t have it all especially while being the reserve.

On the SA front, just be glad most of the debt is in Rands. If you loom at the defaulter nations, they all had dollar denominated debt which itself is an issue when the game rigged against you from trade to very currency of debt. Ie SA has a longer path to default and the current weakness is part gov & part private sector investment strike. <— simply saying it’s all gov doing is either the person being stupid or nefarious/disingenuous.

My question remains the same though, we’ve have near a decade of disinvestment by some big players locally.. are they happy losing it all? Because we getting close to the brink and while Zuma’s time expired, unlike with the apartheid gov.. I don’t see the anc changing because of it fiscal or monetary issues. Instead a more appropriate faction was supported which is bringing some reform.


So yah.. think on that while we wonder how expensive the dollar equiv will be next year.(because the dollar is in for a battering next year given senate, student debt, evictions, corp property loss etc and only debate is how they will tackle it when interest rate already near 0)
Money supply is supposed to double every 10 years, just please note that when you think the numbers are huge (and yes, they definitely are, they're doing it at more than double the rate of what the previous norm was).

This reddit post has a pretty good explanation on it:
TrendingTechGuy

23 points · 1 month ago

Right now the biggest threat to the economy is deflation.
People are loosing their incomes, spending less which leads to businesses making less $$$, more layoffs, lower asset prices. Layoffs leads to default on mortgages and loans which makes all that $$$ dissapear!
To combat this, FED is doing everything it can to create inflation. However creating inflation is hard. For one, the entire environment is deflationary. Secondly, Technolgy is deflationary.
Why is creating inflation hard? Money is created by the issuence of T-Bills. These T-Bills go out into the Repo Market/etc and are purchased by Banks, Governments, Pension funds, etc. This literally pulls money out of the economy which is deflationary. Later that money is spent by the government but it takes time to get around.
So what to do? The Fed goes on a buying spree. They start buying T-Bills and other assets. They buy then by giving the Banks increased reserves at the Fed Bank. This lowest interest rates & bond yields. It also allows Banks to lend out more money.
The ideas is, if we increase the Bank Reserves then the Banks will have more money to lend out. Banks can lend out 9x their reserves and that's how new money is created.
The problem with this solution is that:
  1. Just because the bank has money to lend doesn't mean that there are enough qualified borrowers. (And remember in a recession incomes are decreasing)
  2. there's a Maximum people can borrow. Once you've purchased a home, car, etc your probably not going to buy a 2nd or 3rd home, car, etc.
  3. Bank are required to hold that 9:1 reserve ratio. In a depression, asset prices fall so this puts pressure on the reserves and becomes a risk to lenders. This is why Banks tighten lendinng requirements during a recession.
So the Fed is in a bind. They want and need inflation but the exact opposite happens in a depression.
They can increase the Monterey Base by 22% but they can't force the Banks to lend that money out into the economy.
https://www.reddit.com/r/Bitcoin/comments/j6ud5u/_/g83jzzb
You can of course find other sources that will corroborate it. It's not really a problem that there's more cash.
 

Swa

Honorary Master
Joined
May 4, 2012
Messages
26,330
This is part of the reason why rand albeit sluggish isn’t depreciating as much as it would.. ie the benchmark itself is in decline which seems perpetual as being the bench mark the lag is the only gain.
You realise the Rand is just the most undervalued currency in the world already? Just saying.

On the SA front, just be glad most of the debt is in Rands. If you loom at the defaulter nations, they all had dollar denominated debt which itself is an issue when the game rigged against you from trade to very currency of debt. Ie SA has a longer path to default and the current weakness is part gov & part private sector investment strike. <— simply saying it’s all gov doing is either the person being stupid or nefarious/disingenuous.
Yes be glad our government can just deflate themselves out of it if they get control.
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
28,138
You realise the Rand is just the most undervalued currency in the world already? Just saying.
The question there is, is it really? People keep saying that, but I don't think it is, the issue is more the political uncertainty, the lack of economic growth, policies that are actively hindering it, the tons of debt that all those municipalities and SOE have etc. that somehow needs to be paid which will probably be done via inflationary measures which will weaken the rand more.
You say it's undervalued, I don't really think so unless you're trying to compare it to the economy doing like it did 2000-2007.
 

surface

Honorary Master
Joined
Oct 23, 2006
Messages
11,403

Swa

Honorary Master
Joined
May 4, 2012
Messages
26,330
The question there is, is it really? People keep saying that, but I don't think it is, the issue is more the political uncertainty, the lack of economic growth, policies that are actively hindering it, the tons of debt that all those municipalities and SOE have etc. that somehow needs to be paid which will probably be done via inflationary measures which will weaken the rand more.
You say it's undervalued, I don't really think so unless you're trying to compare it to the economy doing like it did 2000-2007.
Why not compare it to 2007? That was when things started going pear shaped and the Rand started going above R8/$ after having a 1:1 evaluation. You can't compare exchange rate because that's like comparing a slice of bread with a whole bread and asking why the whole bread is so expensive. What you should be looking at is that a burger which costs R5 here would cost you R15 in the U.S. No other currency in the world is so severely undervalued.
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
28,138
Why not compare it to 2007? That was when things started going pear shaped and the Rand started going above R8/$ after having a 1:1 evaluation. You can't compare exchange rate because that's like comparing a slice of bread with a whole bread and asking why the whole bread is so expensive. What you should be looking at is that a burger which costs R5 here would cost you R15 in the U.S. No other currency in the world is so severely undervalued.
I don't really agree with the Big Mac index over the last few years anymore.
It's mostly because the menu has started shifting quite a bit in different regions, Europe forces fresher salad, US is doing similar. In South Africa the burger seems to have gotten smaller, seems more like they're trying to make it a BK competitor by decreasing the price enough.
 

johnjm

Expert Member
Joined
Jul 26, 2005
Messages
2,100
Who uses the Big Mac index nowadays other than a rough estimate of living costs?

Since when is it anything other than the above?

If you normalise the SA Big Mac for labour costs similar to first world countries you will be in for a shock.
 

Swa

Honorary Master
Joined
May 4, 2012
Messages
26,330
I don't really agree with the Big Mac index over the last few years anymore.
It's mostly because the menu has started shifting quite a bit in different regions, Europe forces fresher salad, US is doing similar. In South Africa the burger seems to have gotten smaller, seems more like they're trying to make it a BK competitor by decreasing the price enough.
LOL, ok, but use any other measure and the Rand is still severely undervalued. It should not be trading at over R7/$ at any instant.
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
28,138
LOL, ok, but use any other measure and the Rand is still severely undervalued. It should not be trading at over R7/$ at any instant.
Definitely disagree with that, I think you could probably argue the R10-18 range at best. You haven't taken into account the giant GDP drop, the debt etc. all compared to back when it was at that price. South Africa is also below junk status for investment, so it won't get back to being that strong for a very long while.
 

Swa

Honorary Master
Joined
May 4, 2012
Messages
26,330
Definitely disagree with that, I think you could probably argue the R10-18 range at best. You haven't taken into account the giant GDP drop, the debt etc. all compared to back when it was at that price. South Africa is also below junk status for investment, so it won't get back to being that strong for a very long while.
You are proving my point. You are looking at investor confidence and not real value which is an objective measure.
 

Johnatan56

Honorary Master
Joined
Aug 23, 2013
Messages
28,138
You are proving my point. You are looking at investor confidence and not real value which is an objective measure.
You think the big Mac index is objective? They are not the exact same product in SA vs USA, so can't compare.
 
Top