Rand breaches R18.60 to US dollar

Another new record low.
The rand has depreciated more than R4.60 to the US dollar so far this year.

The rand’s slide continued in afternoon trade on Thursday, breaching R18.60 to the US dollar for the first time.

Global recession worries due to the Covid-19 pandemic and economic fallout, together with last week’s credit rating downgrade of South Africa to “junk” status by Moody’s, is weighing heavily on the currency.

Read: Moody’s junks SA at the ‘worst time’

The rand was trading at R18.62 to the US dollar by around 3:11 pm on Thursday, which meant that the currency has depreciated by more than R4.60 this year alone. On Wednesday evening it closed at R18.27.

Most emerging market currencies are also feeling the pain. However, the rand continues to be the worst-performing currency against the greenback this year, as South Africa faces a worsening recession on the back of a 21-day coronavirus-induced lockdown.

* The rand improved slightly to R18.53 by 4pm, compared to its earlier low of R18.62.

Intraday rand movement

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18:60 to the dollar?
ANC: Hold my beer

ANC cannot hold your beer… they busy “Picking up the Rand”

While it may feel like flogging a dead horse here.

All African socialist states have unbroken track record of depreciating currencies and economic fallout. SA has been no different with avg of 7-8% a year.

The average South African should always be 90% invested offshore with minimal assets in SA for purely liquidity purposes imo.

Amen.

I keep a graph of USD/ZAR from the early 80s (when I was born) until today handy at all times, just in case I get any silly ideas.

Sadly, the Runt is only going one way for the rest of my lifetime. No amount of spin from the media or ANC shills is going to change that.

Amazing.
Foreigners are either prefer to keep cash or buy American stocks.
This fear is irrational.

irrational ?: they are very sane .
Wait till we get the Zimbabwe Dollar 000000,s added to our notes .
Next Malema will probably get Elected .We are passengers on the Titanic:
Enjoy the trip or get helicoptered out .

They are wise to never invest in Zim 2.0

Jobless claims in the US are greater than 6m in 2 weeks. Why should the US currency go up!? The world is wharped

Well..if that is the US, let see what SA delivers

Solutions?

Get rid of bad idealistic racist/sexist policies BEE/EE and AA ASAP!!!

Yet I am afraid like in Zimbo now calling back farmers is when the economy is a dead horse..

Seem to recall an article from Patrick Cairns a while ago where he and some market experts tried to make the case that a downgrade will not impact on our cost of funding or on the rand…

Yep. I have never regarded economics as a SCIENCE, and it can never be.

Proudly brought to you by Luthuli House.

Great! For a Dollar you can get R18.60 PLUS a Government Bond of 10.5%pa(PLUS) for 10 years tax free and your capital back! Why would you not look at this risk its a great investment!!

you can write off the R18,6 !!

The problem with your calculation is in 10yr time the currency is going to be R35 to the dollar and the investment will result in a 50% loss of capital. Not sure why you think coupon payments on bonds are tax free, it’s not. The only thing that’s tax free is dividend income as the company that declared the dividend already paid tax.

The dollar is the reserve currency of the world, backed by the economic power of the USA. Every currency is measured against it. Whilst quantitative easing works for them, if we do it with our poor economic power and financial leadership the Rand will deteriorate to nothing as seen with the Zim dollar.

Economics 101 – you lower interest rates and the rand will weaken. It’s simple, lower yields in SA result in lower interest (investment) from the rest of the world. You combine that with the QE stunt and a full 1% rate cut from the Reserve Bank and we are heading for R20 to the dollar.

Always fascinating that people somehow think SA is a first world country like the USA and recommend strategies like quantitative easing and low interest rates and somehow expects the currency to be strong.

The double sword is why open a business with all the risk just for the government to offer 10%, your profit margins need be at least 25%.

First world countries need first world solutions, 3rd world countries need 3rd world solutions.

The reason the Rand is weakening is largely due to the fact that the supply of major currencies, esp. dollar, is rapidly shrinking, despite the massive money printing on part of Fed and record low interest rates in US. The reason being, due to Corona, people in the US are sitting at home and are not spending money. With nothing to spend their money on, they do the next logical thing, pay off their debts. This destroys money in the economy at a rapid pace, thereby strengthening the dollar. Furthermore, with the Coronavirus response, countries around the world are taking on more dollar denominated debt thereby stoking further demand for dollars. Furthermore, when people sell their stocks in the US, they put their money into cash, thereby creating additional demand for dollars. The value of the Rand is minimally impacted by recent QE actions of SA reserve bank and the fact that the country downgraded. Yes, our lowering of interest rates has something to do with the weakening, but its not that significant. Due to above mentioned forces, it is completely normal for Rand to significantly weaken in times of heightened fear. It should either strengthen when the crises subsides or it will just stay the same for a few years. Over the long term, provided our money supply is managed responsibly, the Rand should broadly track our local inflation rate. Yes, it is scary to observe the volatility of Rand, but don’t let it get you down.

Someone who actually understands what is happening.

The rand is falling primarily because of heightened lack of liquidity and demand for dollars… It has very little to do with South Africa or our interest rates or moodys as the media would like to present.

The rand also leads the fall as has been in different periods it has been in many circles.

People are short minded, the global economy is not OK… It is has relied for far too long on loose monetary policies of the developed world, therefore these circles will also be more frequent… Too much debt, that is leading over valued asset in America and the likes.

Foreign holders of US treasuries have sold over $100 billion… So there is a lot of dollar demand right now… The question is when is a turn around

@tbos “The rand is falling primarily because of heightened lack of liquidity and demand for dollars” but then shouldn’t ALL currencies fall at the same rate as the rand if this was the case?

@Timmos “then shouldn’t ALL currencies fall at the same rate as the rand if this was the case?” The main source of forex for SA and emerging markets in general tends to be sale of commodities. During times of global contraction, demand for commodities and (consequently) emerging market currencies, drops. This impacts emerging market currencies to varying extents, depending on the makeup of the specific basket of export goods of the country backing the currency. In SA, since a proportionally large percentage of our export goods concern commodity goods, our currency tends to be highly responsive to global economic contraction and expansion.

I left out another important source of dollar strengthening. Since the Corona epidemic has shutoff many supply lines, dollars newly minted by the Fed are trapped in the US economy and few of them are making out into the global market. Since the dollar is the reserve currency of the world, global corporations are finding it difficult to acquire dollars in order to facilitate their international transactions.

I am a simpleton but this “the Rand should broadly track our local inflation rate” I agree with but why? It is chicken and egg. The local inflation rate is stoked by ZAR depreciation making imported goods more expensive = inflation. My simplistic mixed up view; the inflation rate is a measure of how much less productive we are each year. For example, electricity prices go up because Eskom cannot produce electricity efficiently; ditto for most administered prices; the recent highest contributors to inflation currently. That ripples through the economy and hey presto, everyone needs more to pay their administered services accounts. Hello inflation. But we cannot do this with exports, simply jack up the prices, that is where the real rubber meets the road. So more ZAR are printed to buy the same goods and services and hey presto, inflation.

School me.

Man, that is a significant write off on SA based assets – that’s just brutal, there is just no other way to sugar coat it. Can anyone spot the bottom yet? Ouch, the pain of it, in addition to the licking portfolios have taken with the significant share drops!

R30/USD within the next 10 years.

Sorry to burst your bubble…Exchange rate was R10 per USD in 2014 so in 6 years lost half its value.
Won’t take more than 4 or 5 years to go to R30 in my opinion. (Lose additional 33%.)

End of comments.

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