South African business owners and investors are very sensitive to currency movements, particularly if they are invested in the JSE or importing / exporting goods and services.
The Rand is one of the most volatile and liquid currencies in the world and is particularly sensitive to political developments and capital flows. Since the announcement that Cyril Ramaphosa would take over as President of the African National Congress (ANC), the Rand has strengthened significantly.
Much of this is due to positive political sentiment rather than supporting underlying fundamentals – South Africa still remains on the verge of a full sovereign downgrade.
This graph below tracks the Rand against the US dollar (Orange), British Pound (Blue) and Australian Dollar (Red) over the past 5 years:
While currency movements are notoriously difficult to predict, it could be argued that the Rand strength does not fairly represent the fundamentals of the country and it may be an opportunity to convert Rands into foreign currency.
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