Rand no longer seen as indicator of country’s economic prospects

An exchange rate is often seen as a country’s ‘share price’ – people see it as a reflection of the nation’s economic prospects, political stability, fiscal discipline, any changes in government policy, and inflation rate. We believe the rand will strengthen if these things improve and worsen if they don’t .

Figures from the African Development Bank show that the continent is offering opportunities, with real GDP growth exceeding 3% most years in the last decade. SA has seen its currency decline sharply over the last 10 years, from R8.47 against the dollar at the beginning of 2009 to R14.39 late Tuesday afternoon. Of other large developing countries, only Brazil, Turkey, Russia and Argentina performed worse.In Africa, the currencies of Nigeria, Ethiopia, Ghana, Malawi, Sudan, Angola and Mozambique have performed better than the rand.

She explains that “factors specific to SA only tend to play a major role in the value of the rand if news is either much worse or much better than [the] markets expected.”One would get a much better idea of the value of the rand by measuring how international investors perceive emerging markets as a whole. Unfortunately, this is difficult.

“This is why the trade war between the US and China has such an influence on emerging market currencies, including the rand,” says Weimar. “Rising protectionism will ultimately hurt global growth, but will undoubtedly hit small and open emerging economies more than those of larger developed countries.”

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