Huge One Day Drop in Rand

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May 15th, 2003, 11:21 AM
  #1
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Huge One Day Drop in Rand

I just took a look at the exchange rate for the first time in a couple weeks. Wow! The dollar has rallied back folks on concerns that S. Africa is going to lower their interest rates.

Just 10 days ago, the rate was approx R7.12/$

Now, we are back over R8/$. Current quote from Bloomberg is 8.02.

From what I read, I guess exports have declined as the Rand has strengthened (up 55% over past 14 months). So now there is some panic that rates will be lowered due to weak growth and to attract more international $$. Pretty crazy stuff. We'll see what happens in the next couple days.

Good timing for Rocco and all those on their way to vacation.

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May 15th, 2003, 12:12 PM
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Matty - thank you so much for this - does it look like this will hold or get better?
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May 15th, 2003, 12:21 PM
  #3
itleyen
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One factor is Bush has changed the US policy to permit the dollar to weaken against other currencies. Our trade deficit per month is approaching $50 billion, and overseas sales are difficult. Hard to say how this will shake out with the Rand (the huge advantage for the dollar got underway in the fall of 2000, and picked up steam from there, reaching about 12:1. What the relationship will be 30 days from now is anyone's guess. Hard to think the dollar will rebound too much, but who knows. SA would, I think, wish to keep the Rand weak to promote their sales abroad (e.g., wine).
 
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May 15th, 2003, 12:35 PM
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30 days? I'm only wondering about how it will be tomorrow vs today <s>
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May 15th, 2003, 12:36 PM
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Exports are the key issue here for South Africa. Exports make up more than 1/3 of the entire country's GDP (business transactions). These exports have fallen dramatically as the Rand has strengthened recently and it has had a negative affect on the S. African economy.

Look for the Rand to continue to weaken over the next few months, so that exports pick up again, and foreigners revamp their purchasing S. African goods.

Remember, the Rand has had a tremendous rally, and has appreciated sooooo much in the past year. It is time to give much of that back. But.....

it all depends on what the central bank in S. Africa does with interest rates. They raised rates 4 times last year which fueled the huge Rand appreciation in the first place.
Now this could be the beginning of the reverse (lowering rates).
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May 16th, 2003, 03:39 PM
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sandi
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When we were in SA in '01 the rate was USD$1 = SARand 10.5, it went as high as SARand 11+.
When the dollar weakened against all world currencies the panic set in especially for travelers. Just look at the USD vs the Euro.
For travelers it's important since trips to Southern Africa (SA, Namibia, Botswana, Zimbabwe) are quoted in USD and at the current rates it's costing us at least 25% more to travel there. For rooms that we paid in '01 at Singita at $600 person/night (our only splurge) are now running over $800 per/nt. Same holds for other services when the dollar is weak, whether in Africa or elsewhere.
 
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May 16th, 2003, 08:21 PM
  #7
 
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I know Sandi, it hurts to look at last year's charts. Today I see the rand dropped down again (although not as low) -

7.84733 zar to the dollar

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