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Our volatile but resilient rand: 'Driven only one-third by domestic factors'

12 January 2021 6:48 PM
Tags:
Rand
The Money Show
Bruce Whitfield
Exchange rate
John Cairns

'Don't forget the rand tends to strengthen slowly and then weaken quickly.' Bruce Whitfield interviews RMB strategist John Cairns.

The one thing the rand is - if nothing else - is incredibly volatile!

Bruce Whitfield, The Money Show host

The currency may have started 2020 at about R14.50 to the US dollar and ended the year around R14.60, but during those 12 months it was anything but stable, remarks Bruce Whitfield.

"It traded as weak as R19.26 to the dollar on the 5th of April and then R14.60 on New Year's Day this year."

On Monday, ten days later, the rand fell to a one-month low of R15.58 to the US dollar.

John Maytham speaks to John Cairns, Global Markets Strategist at Rand Merchant Bank (RMB).

Cairns notes that South Africa has the second most volatile currency in the world.

We must never forget this ability of the rand to move very quickly, and particularly the ability of the rand to weaken very quickly. It tends to strengthen slowly and then weaken quickly.

John Cairns, Global Markets Strategist - Rand Merchant Bank

It's the Brazilians who typically outdo us. The Turkish lira's also been particularly volatile.

John Cairns, Global Markets Strategist - Rand Merchant Bank

Typically, volatile currencies are emerging markets, commodity exporters with high inflation and interest rates... In the developed world it's Australia, New Zealand and Canada.

John Cairns, Global Markets Strategist - Rand Merchant Bank

Cairns says the ongoing rally in commodity prices is helping South Africa's export sector.

However the import sector is still constrained, largely due to weak domestic demand because of the economic fallout of the lockdown.

He emphasizes the effect of movements in the global economy and looks at the chances of a global recovery in 2021.

The rand - just like it did after 2001 and 2008 - has come screaming back.

John Cairns, Global Markets Strategist - Rand Merchant Bank

I always like to say the rand is driven two-thirds by global factors and one-third driven by domestic factors.

John Cairns, Global Markets Strategist - Rand Merchant Bank

There's so much optimism out there about a vaccine-inspired economic boom in the second half of 2021; markets have been betting on that... and the rand's been caught up in that whole wave.

John Cairns, Global Markets Strategist - Rand Merchant Bank

Listen to Cairns discuss the drivers of the hoped-for 2021 recovery:




12 January 2021 6:48 PM
Tags:
Rand
The Money Show
Bruce Whitfield
Exchange rate
John Cairns

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