South African Rand Bucks Recent Downtrend

8 Feb 2011 at 4 PM - Written by John Cameron

STORY LINK South African Rand Bucks Recent Downtrend

The Rand has suffered significant losses against all the majors over the last six weeks. Since the turn of the year, the Rand has weakened from 6.58 against the US Dollar to trade above 7.31 at the end of last week. These losses have been partly attributable to comments from policy makers in South Africa who suggested that a weaker Rand was desirable. This has led to rumours in the market that the South African Central Bank is taking steps to actively weaken the Rand.

South Africa entered into an interest rate cutting cycle when its central bank cut rates in December 2008, most recently cutting its rate to 6% in September 2010. Whist speculation in most major economies surrounds the timing of central bank rate rises, South Africa is left almost on its own in considering further loosening of monetary policy. This has weighed heavily on the Rand.

On a more positive note, the Gold price, denominated in South African Rand, reached its highest level for two year’s during today’s trading session, reaching above ZAR9,900 per oz. at one point. This is good news for South African export figures.

This week has seen increased optimism surrounding the Rand, seeing it strengthen from yesterday’s opening level of 7.25 against the US Dollar to touch 7.15 on the wholesale market during today’s session. This forward move has been driven by increased risk sentiment in world markets which has caused broad gains for all of the high yielders. Whilst South African policy makers continue to push for a weaker Rand, there is significant risk of downside. Any readers looking to send money back to the UK from South Africa should consider acting now before the situation deteriorates for them.

TAGS: Pound Rand Forecasts South African Rand Forecasts