Weakening rand ...why

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midnightcaller

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Please can someone give me a laymans explanation as to why the rand is weakening against USD EURO and GBP?
 
Blame Jan. This has only been revealed recently.
 
- China devalued its currency. Puts downward pressure on other developing countries' currencies to stay competitive.
- Expectation that US/Euro/GBP will some time soon increase interest rates. Puts pressure on capital to flow out of developing countries.
- Relatively high inflation/low growth compared to US/Euro/GB.
- Downwards price pressure on most commodities. Hurting mineral exporting countries like SA.
 
Does it mean that foreign investors are selling their equity stake in SA companies and then take the ZAR cash and converting to USD/EU/GBP and then taking the USD/EU/GBP out of SA and back to their home country?
 
midnightcaller said:
Does it mean that foreign investors are selling their equity stake in SA companies and then take the ZAR cash and converting to USD/EU/GBP and then taking the USD/EU/GBP out of SA and back to their home country?
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Indirectly yes. They are buying less/selling more SA equities, bonds, properties, minerals, etc. The demand for ZAR is lower so the ZAR price goes lower. That's the theory, but in practice currency traders try to pre-empt the effect news will have on the currency and trade in that direction when the news breaks. That's why the currency can jump so much on one day, not because of the actual fundamentals that change so quickly, but because traders immediately factor in news into the price.
 
I understand that all emerging markets are taking a hit.


I am trying to understand how supply and demand for a currency influences the ZAR.
I am struggling to understand this. Hence I ask for laymans explanation.
 
Probably a good time to trade currencies?

I mean the Rand can't weaken forever right?
 
midnightcaller said:
I understand that all emerging markets are taking a hit.


I am trying to understand how supply and demand for a currency influences the ZAR.
I am struggling to understand this. Hence I ask for laymans explanation.
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At least you understand the reason. netcruiser gave you a few points which may or may not be true.

IMO, it's all about supply and demand. If many people sell their Rands for other currencies, then there are many Rands available for sale, which means that if you want to sell, you are competing against many people who are selling. If people are buying suddenly, the value of the Rand goes up.

To explain it in simple terms, If nobody is buying petrol and demand goes down, the price goes down. If more and more people are buying, the demand is higher and they can therefore charge more.
The price of anything is what somebody would pay for it.

so, if nobody wants something, the value goes down.

other factors that can influence it is how many rands our country is printing. more printing = more available in the system = less worth.
 
Monsta Graphics said:
At least you understand the reason. netcruiser gave you a few points which may or may not be true.

IMO, it's all about supply and demand. If many people sell their Rands for other currencies, then there are many Rands available for sale, which means that if you want to sell, you are competing against many people who are selling. If people are buying suddenly, the value of the Rand goes up.

To explain it in simple terms, If nobody is buying petrol and demand goes down, the price goes down. If more and more people are buying, the demand is higher and they can therefore charge more.
The price of anything is what somebody would pay for it.

so, if nobody wants something, the value goes down.

other factors that can influence it is how many rands our country is printing. more printing = more available in the system = less worth.
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Yea but no.


In theory that applies to everything, but the Rand situation is a little bit more complicated than that
 
genetic said:
but the Rand situation has nothing to do with that.

FTFY.
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Nothing? A currency's value has nothing to do with (a) the supply of a currency in circulation, and (b) the demand for it in the market?
Wow, somebody needs a crash course in economics... maybe even the basics.

I'd be as bold as to suggest the simple laws of supply & demand are the ONLY ones dictating the price of a currency. any currency.

If you disagree however, please reply... I'm waiting with bated breath to hear your reasons! :D
 
Monsta Graphics said:
Nothing? A currency's value has nothing to do with (a) the supply of a currency in circulation, and (b) the demand for it in the market?
Wow, somebody needs a crash course in economics... maybe even the basics.

I'd be as bold as to suggest the simple laws of supply & demand are the ONLY ones dictating the price of a currency. any currency.

If you disagree however, please reply... I'm waiting with bated breath to hear your reasons! :D
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Here is a whole thread of people.

http://mybroadband.co.za/vb/showthread.php?t=102807
 
The short explanation as to the weakening rand is gravy and trough.
 
Thor187 said:
Yea but no.


In theory that applies to everything, but the Rand situation is a little bit more complicated than that
Click to expand...

Sure there can be complicated reasons for why supply or demand have changed, but in the end that's what the price change comes down to (in this case, lower demand and/or higher supply resulting an a decrease in market price)
 
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