Real Estate Investor Magazine South Africa REIM February 2018 | Page 58

CURRENCY
Another Rollercoaster Year for the Rand
Figuring out what lies ahead
on the ropes, back it would bounce (sounds like some poli-
tician we have come to know so well!)
In fact, it seemed to take the worst news possible - like
Junk Status downgrades - to spark life back into the Rand
and trigger a significant strengthening, as the below Chart
shows.
JAMES PAYNTER
Director and Head Analyst at
Dynamic Outcomes Inc.
A
nother rollercoaster year for the Rand has passed...
and who would have believed that we would have
ended such a tumultuous year with the local cur-
rency making its second straight year of net gains. What
makes it even more surprising is that the year was plagued
with Rand-pummelling events, as the local currency was
buffeted by one storm after another - from economic, to
social and, of course, political.
From Gupta Leaks and Fees Must Fall protests, to Cab-
inet Reshuffles and Zuma Must Go marches and no-confi-
dence votes (which Zuma managed to survive, but not his
numerous Court challenges to justice having its way). Not
to mention the woeful economic outlook, and a deepen-
ing water and energy crisis - together with increasing rapid
economic transformation rhetoric.
And, of course, ANC in-fighting ahead of a closely-con-
tested ANC Elections, with Cyril Ramaphosa eventually
coming up trumps...but not with all the cards he would
have liked in his hand.
Rather a woeful list of mostly low notes.
Unexpected reactions
Yet strangely - and against all conventional wisdom and ra-
tional thinking - just when the Rand appeared to be finally
56
FEBRUARY 2018 SA Real Estate Investor Magazine
Figure 1. USDZAR 2017 History
This is something that completely baffles the rational mind
- laymen and economists alike. That is because, contrary to
mainstream economic theories and conventional wisdom,
the markets are not moved by rational logic, but by irratio-
nal emotional human beings.
And just as we have cycles in nature (night and day, ebb
and flow, high tide and low tide, winter and summer), so
there are cycles in human nature - which are especially seen
in financial markets.
So instead of the markets moving in a straight line, they
move in a zigzag fashion as the emotionally charged deci-
sions of millions of people. These emotions swing from
one extreme (of hope and greed) to the other (of fear and
despair), and drive the market to trend and countertrend, in
larger and smaller degrees.