Real Estate Investor Magazine South Africa Real Estate Investor Magazine - June 2017 | Page 58

CURRENCY
A Deferred
Armageddon
Making Cents of the Rand
BY ANDREW RISSIK
I
t’s been a while now since Pravin Gordhan
was removed as Finance Minister, an event
that triggered a series of downgrades by the
international ratings agencies, Fitch and Standard &
Poor, where our sovereign credit rating was relegated
to sub investment grade or junk status. Well,
Armageddon has not happened and many people
seem confused as to why the Rand has not collapsed,
but has in fact strengthened at times in the past few
weeks. In fact, it’s been difficult to generate interesting
content to write about the Rand when day after day
the themes remain the same and the dynamics remain
largely unchanged.
There are two broad factors that one needs to look
at when trying to understand why the Rand behaves
the way it does ‒ sentiment and fundamentals.
How our currency is at the mercy of
unpredictable sentiment
This is what’s responsible for the short-term, wild
fluctuations that we often see in the price of the Rand
against so-called hard currencies (the Dollar, Euro,
Pound, Yen etc.). One also needs to look internally
at South Africa and what’s driving the market
sentiment, as well as what’s happening outside of the
Republic that has an impa