South Africa has always enjoyed a very volatile currency that can create big swings on the currency markets. Economic and political uncertainty combined with a very high interest rate currently at 10.5% present a challenging yet rewarding ‘risky’ asset. Whilst sterling collapsed last week one currency was dealt a similar blow with the Rand losing almost 5% as Finance Minister Pravin Gordhan appears to be the victim of a witch hunt.
Pravin had been seen as one of the more secure and stable elements in the Jacob Zuma Government. His transparent and egalitarian ideals appear at odds with many factions in Government.
Mr Zuma himself has 783 counts hanging over his head including corruption yet South African authorities are targeting Pravin at great cost to confidence in the South African economy. The Rand is one of a number of Emerging Market economies that is perceived as ‘risky’ owing to these movements.
Despite the political fears the Rand enjoys 3 year highs against the pound and has improved some 41% since the start of 2016. On a 1m ZAR transfer enacted at the best rates versus the worst in that period you are achieving an extra £18,000. With political uncertainty knocking both currencies it is really a question of which will perform worst.
The pound is undergoing some big changes but there are a number of varying external factors that will affect the Rand including the price of commodities like Gold which have risen lately but could lose value following the US Election as investors seek less ‘safe haven’ shores.
Unemployment in South Africa is 25% and recent protests over University Fees which erupted in riots reflect the volatile politics South Africa enjoys.
Whilst the pound may fall further I would not be too greedy holding my Rands and would be quickly looking for any spikes to lock in the impressive gains of 2016.
Clients looking to sell ZAR for GBP may want to consider doing so sooner rather than later. Call our trading floor on 01494 725 353 to discuss a transfer.
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