South Africa

Don’t be fooled by the rand, plus five highlights from 'Vrye Weekblad'

Another example. In the fourth quarter of 2007, leading up to the financial crisis of 2008-’09, the average trading value of the rand was R6.75/$. Just more than 12 months later, with the crisis in full swing, its trading value nudged R10/$, only to soar past R7/$ after the American and other central banks cut policy rates to the bone and pumped vast amounts of money into their economies.

The point is that the rand is extremely sensitive to major world events — and that is not to deny the significance of local events, as evidenced by the tumble to R16/$ on the memorable weekend in 2015 when Jacob Zuma replaced finance minister Nhlanhla Nene with the unknown Des van Rooyen.

Must-read articles in this week's Vrye Weekblad

The movement of the rand against the US dollar in 2020 is a striking example of how difficult it is for economists and investors to predict the future value of exchange rates.

This is especially true in times of great uncertainty for the world economy.

The rand closed just this side of R14/$ on December 31 2019. By April 2020 it had weakened to a record low of R19/$, yielding more than a third of its value in just four months amid unprecedented investor uncertainty about the economic impact of the coronavirus. But that was only the start of the story. On the final trading day of 2020 the currency was trading at about R14.70/$, closing weaker than at the end of 2019 despite a rally in the second half of the year.

This volatility is nothing new, writes Hugo Pienaar: “My first professional assignment was reporting on the tumbling rand in December 2001 when it traded at R13.85/$, a record low at the time, partly as the result of the terror attacks in New York and Washington three months earlier. Three years later it briefly rebounded to around R6/$.” In both cases most analysts were caught off guard.

Read more about the economy and more news and analysis in this week's issue of Vrye Weekblad.

Football news:

Cavani has returned to training and is likely to play against Crystal Palace
Fabio Capello, Juventus played Rugby against the Port. Only Ronaldo and Chiesa can make a difference in this squad
Neymar: I posted how I was recovering from my injury, and I didn't get any messages saying, Wow, what a professional. No
Ole Gunnar Solscher: The work of the judges is very difficult and without additional pressure. We have to make their decisions
Joan Laporta: I'm sure Messi won't stay at Barca if I don't win the election. He gives the club 30% of revenue
Trent had idolized Gerrard since he was a kid, and he was in a fairy tale: he got Steven's care and the captain's armband. The story of a great relationship
Hazard's recovery from the injury is delayed. He probably won't play against Atletico on March 7