Why the Rand has Gotten Stronger

For many years now, South African’s have been looking at the position of our currency on forex platforms with no small amount of disappointment with regards to the performance of the Rand. It is no secret that our currency leaves a lot to be desired in terms of its value; though those who have been waiting the market closely over the past couple of months have been able to breathe a sigh of relief as the Rand claws its way up the ranks. But what has been the reason for the rise, and what does this mean for investors of all types?

The Commodity Currency

As a land that produces a large amount of the world’s resources and commodities, it makes sense that fluctuations in the value of commodities will have an effect on the Rand. For instance, an increase in demand for gold or diamonds will likely raise their value, and therefor the value of the currency they are commonly traded in, the Rand; while a fall in demand or production will likely have the opposite result.

The End of an Error

To use Jonathan Shapiro’s terminology for the end of the Zuma era in South Africa as an example of how a country’s political landscape can affect the value of their currency, it is easy to see the tie between the change of leadership in our country and the positive effect it has had on the Rand. From the very second that former president Jacob Zuma announced his reluctant retirement, the rand started climbing immediately, and it is still going strong as we write this.

Building International Investor Confidence

The change has also increased investor confidence in our county, which is a relief since not that long ago we kept on getting our investment status demoted to new levels of lowness. International investment drives a staggering amount of wealth in our country, and even has a role to play in local investment confidence. The great news is that since Cyril Ramaphosa (our new president) is a respected and successful businessman, we can expect such investment, and the building of confidence around it, to be prioritised by the new regime.

The Rand and the Dollar

The South African Rand, much like just about any currency in the world, is closely tied to the performance of the US Dollar. Whenever the Dollar is doing well, it generally has a negative effect on all of the others. At the moment, and under the leadership of President Donald Trump, the US Dollar is suffering a bit, mix that in with the fact that there have been an average of 3 school shootings in the US per week in 2018, and the Rand is starting to look even better; morbid as it may be.

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