Rand didn't gain value

TRUTH: SA CURRENCY NEVER STRENGTHENED, BUT GREENBACK WEAKENED >>> Rising gold prices, geopolitical tension prop up currency.

- Adriaan Kruger

REBOUND. The rand's resilience will depend on both 'external developments and the pace of local reforms'.

(Picture: AdobeStock)

It might look like the rand has strengthened remarkably since the beginning of the year, but the truth is that it didn't really.

The impression of a stronger currency is created by our focus on the rand/dollar exchange rate and the fact is that the dollar weakened significantly rather than the rand strengthening.

The net effect is that the exchange rate improved from R18.70 per dollar at the beginning of the year to the current R17.34, after reaching a best level of R7.15 on 8 October.

However, the rand still weakened against the euro, from R17.93 at the beginning of the year to the current R20.23.

It fared slightly better against the British pound, because - like the US - the UK economy is facing challenges.

Siphamandla Mkhwanazi, senior economist at FNB, says the rand has staged a notable recovery since May - when it hit a low of R19.75 to the dollar in response to US President Donald Trump announcing high import tariffs on SA goods.

This followed the announcement that US government agencies would stop all financial aid to SA.

Mkhwanazi says several global factors have contributed to the rebound of the rand, with expectations around US monetary policy an important factor.

"Growing market anticipation of a US Federal Reserve (US Fed) rate cut has weakened the dollar and supported emerging market currencies like the rand," he says.

"The US inflation data for September came in slightly above expectations, but Fed officials have signalled comfort with the inflation trajectory reinforcing expectations for a modest 25 basis points rate cut.