Where is the ZAR going?

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DrewChan

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How bad is our current situation financially? Are we heading towards complete economic meltdown or is this merely a short/medium term blip?

TLDR; How worried should we be?
 
I doubt it is a short/medium term thing, probably longer but I don't really know all the ins and outs so I could be very wrong.

Looking at the way things are going with our lovely government and how BBBEE is more important than getting the best person for the job in place...I just have my doubts it is a short term problem.
 
Well, how I see it, is that we should be worrying. I was shocked to see the rand to the dollar being at R11 now...and it feels like it will reach R13 sooner or later. What makes me worry is these endless strikes - the miners being on strike really has a detrimental effect to the economy. If one group finishes their strike, another one starts their strike :( I am sure investors now are scared...I dunno...this is what I am thinking right now...
 
A major factor having an influence on the Rand at present is the reduction in market stimulus in the USA which started this month. This has resulted in a stronger dollar and most currencies have been taking a beating because of this.

The markets should normalize and adapt to this new environment but this can take months to play out and or find its new rhythm.

Another rather large factor influencing the Rand is the fact that SA is not seen as an attractive investment location at this stage due to uncertainty in government policy etc. The ruling party makes a big thing about implementing the national development plan and such but action is severely lacking. It just stays at talk talk talk and in the mean time we have strike after strike, a budget deficit that is out of line for our size economy, a growth figure which seems soon to become one of the lower ones in Africa etc...etc....

After the 2008 crash most currencies managed to make hay while the sun was shining and have clawed back their losses against the dollar. Most have managed to claw all the losses back plus gain some more against the dollar. Most are now, after the drops of the past month or two, back to where they were before the 2008 crash so in a rather 'okay' position. The Rand however followed its own direction and just kept on losing more and more ground against the dollar during the time others gained. While the others are back to pre 2008 crash levels we are right back at the worse of the 2008 crash levels i.e. on the edge of the cliff, again.

Many say that the Rand will return to under R10 but I cannot see this happening. The market is always in balance or rather always return to a point of balance. If you look at our economic data then one can say that the Rand is trading at its perceived value i.e. weak economic data with an uncertain outlook = weak currency with little foreign investment to support it.

In order to return the Rand below R10 the government will have to make some serious commitments in regards to the economy and put a proper plan on the table [which we already have] but more importantly show some action in regards to that plan. We currently have all the ideas, plans, laws etc.. yet little action and without that the Rand will keep on trading at its perceived value.

In my opinion.... R11 is the new balancing point i.e. I see it between R10 and R12 for most of this year unless something drastic happens i.e. election results etc...

Just my 2 cents...

EDIT: This is not investment advice, please do not base any investment on my 2 cents. I'm not an economist [not that most of them have a crystal ball] and the above is just my own personal opinion.
 
Last edited:
MKFrost said:
A major factor having an influence on the Rand at present is the reduction in market stimulus in the USA which started this month. This has resulted in a stronger dollar and most currencies have been taking a beating because of this.

The markets should normalize and adapt to this new environment but this can take months to play out and or find its new rhythm.

Another rather large factor influencing the Rand is the fact that SA is not seen as an attractive investment location at this stage due to uncertainty in government policy etc. The ruling party makes a big thing about implementing the national development plan and such but action is severely lacking. It just stays at talk talk talk and in the mean time we have strike after strike, a budget deficit that is out of line for our size economy, a growth figure which seems soon to become one of the lower ones in Africa etc...etc....

After the 2008 crash most currencies managed to make hay while the sun was shining and have clawed back their losses against the dollar. Most have managed to claw all the losses back plus gain some more against the dollar. Most are now, after the drops of the past month or two, back to where they were before the 2008 crash so in a rather 'okay' position. The Rand however followed its own direction and just kept on losing more and more ground against the dollar during the time others gained. While the others are back to pre 2008 crash levels we are right back at the worse of the 2008 crash levels i.e. on the edge of the cliff, again.

Many say that the Rand will return to under R10 but I cannot see this happening. The market is always in balance or rather always return to a point of balance. If you look at our economic data then one can say that the Rand is trading at its perceived value i.e. weak economic data with an uncertain outlook = weak currency with little foreign investment to support it.

In order to return the Rand below R10 the government will have to make some serious commitments in regards to the economy and put a proper plan on the table [which we already have] but more importantly show some action in regards to that plan. We currently have all the ideas, plans, laws etc.. yet little action and without that the Rand will keep on trading at its perceived value.

In my opinion.... R11 is the new balancing point i.e. I see it between R10 and R12 for most of this year unless something drastic happens i.e. election results etc...

Just my 2 cents...
Click to expand...

Good read, thanks. But your 2 cents is now worth 1.85 cents ;)
 
My personal forecast is within the 10.80 to 11.80 for 1 USD range for the remainder of the year (All else remaining equal).

We might see pressure on the high end should strikes continue and/or political instability.

The SARB's main focus is on inflation and the 6% target will be tested this year which might force an increase in interest rates.
 
XennoX;11993301...start paying off your debts quicker.[/QUOTE said:
Please help me here. If I expect inflation then i should go into debt to leverage it rather than paying of the debt. Also assuming i can afford to pay the implied increased rate. Debt is part of my assets. That said, i suppose it matters what type of debt i go into. A few drunken nights at Boobies on the credit card ain't gonna impress no one.
Click to expand...
 
chicken247 said:
Please help me here. If I expect inflation then i should go into debt to leverage it rather than paying of the debt. Also assuming i can afford to pay the implied increased rate. Debt is part of my assets. That said, i suppose it matters what type of debt i go into. A few drunken nights at Boobies on the credit card ain't gonna impress no one.
Click to expand...

Not sure which kind debt is part of your 'assets', possibly debtors who owe you money? If so then you will have to keep a closer eye on that debt to ensure that your debtors do not start slipping on their payments due to increased financial pressure on their side. If they do slip and default you essentially lose your 'asset' and together with that possibly the rest of your business should you go under.

In regards to general debt and inflation - increased inflation will mean the eventual increase of interest rates in order to put a damper on buying i.e. decrease the demand for goods through higher interest rates which in turn leads to prices coming down again due to the decreased demand.

The increase in interest rates means that your total debt will increase i.e. monthly payments will increase with the increased interest and the total to be paid back will thus be more. The sooner you can get this debt settled at the current rates the more you will be able to save.

If you are unable to settle the debt you should at least try and build up a buffer by paying more in order to possible cover you when times really do get tough.
 
DrewChan said:
How bad is our current situation financially? Are we heading towards complete economic meltdown or is this merely a short/medium term blip?

TLDR; How worried should we be?
Click to expand...

We should be touching the R11 and perhaps even R12 I think.
 
Nobody can call currencies but with out even looking at a chart you can get a feel for it.My view is that the Rand will be weaker as where is the positive news going to come from in the short term. With QE being unwound ,surely money going to make its way back to the USA from our equity market .Also markets overshoot and dont think we have overshot our weakest Rand yet
 
I also expect the ZAR to stay at the same level or to even weaken further unless decisive action is taken by the Reserve Bank and Government.

The Reserve Bank should start to gradually increase interest rates, 50p this week should send a signal that they are serious.

IMO interest rates have been too low for too long now, South Africans always borrow too much, and spend too much at lower interest rates, and they invariably spend too much on imported goods, which does not help the trade balance.
 
Be glad none of you stay in Turkey....

Their rates was just bumped up with 4.25% from 7.75 to 12%. Imagine your home/vehicle loan being bumped up with 4.25% just like that.

The Rand made some good gains on the news as money immediately moved to other currencies. From what I can see the main beneficiaries were ZAR, AUD and NZD.

Rand back under R11 for now, currently on R10.9175.
 
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