MARKETS
The Mighty Rand
The Unlikely Hero of 2016
BY JAMES PAYNTER
We are already two months into the new year and memories of last year are rapidly starting to fade. Most will not be disappointed: 2016 was a year best forgotten, and for good reason too. The past calendar year was one of the most tumultuous years we have seen ‒ from an economic, political and social point of view ‒ with multiple shocks hitting front page news throughout the year, keeping business confidence and growth at depressing levels.
But against all this gloomy background, there emerged an unlikely hero: The Rand. Yes, it has been comeback time for the local currency. After being pummelled in each of the five years prior, the Rand ended the year with its head held high, having gained 11.2 % against the Dollar( even more against the Pound), and in so doing being named the 5th best performing currency against the dollar for 2016 after Russia, Brazil, Iceland, and Zambia.
This was not without major volatility, mind you- averaging 30 cents( 2 %) moves per day!
It was also the Rand’ s 6th best performance over the past 35 years ‒ pretty impressive!
If you look at the background against which these gains were made( the Rand started the year on the ropes, and was continually dealt body blows at regular intervals), there is no logical explanation whatever for this significant gain in value. This is why many people were hurt badly this past year, expecting the Rand to fall out of bed( or out of the ring) at the next bit of bad news ‒ even as it steadily gained against the dollar. This time last year, all the pundits were forecasting a dreadful year for the currency, simply looking at the past and extrapolating it into the future:
Bad performance + bad news = worse performance
This is simple and rational logic, right? Wrong... It’ s clear that that didn’ t happen ‒ but why? The answer is simple: because the markets are not moved by rational
58 MARCH 2017 SA Real Estate Investor www. reimag. co. za