Despite negative news-flow and concerns around credit downgrades, the South African Rand has had a positive month against the US dollar, Euro, Pound Sterling and Australian Dollar.
In the graph below, we map the performance of the Rand against the 4 currencies over the past 30 days:
While there has been a lot of perceived negativity around the state of the South African economy, there have been a handful of positive data points which suggest a marginal improvement in the economy. This includes:
- A marginal improvement in the unemployment figures reported in January
- A slight improvement in December Tourism Figures
- Improvement in the Manufacturing Sector in 2018
The Rand remains one of the more volatile currencies in emerging markets but this recent bout of optimism – despite a lot of negative news around our State Owned Enterprises (SOEs) and the anaemic economic growth record – suggest that there is some improvement in sentiment toward South Africa.
Even recent geopolitical tension between India and Pakistan has not resulted in a move out of emerging market currencies, something which suggests that foreign investors are looking at South Africa with renewed interest.
The below graph from Trading Economics highlights the movement of Foreign Direct Investment (FDI) and how we regressed over the past 2 years. If we can demonstrate an improvement in economic activity, this figure is likely to recover through 2019:
Volatility in the currency remains a challenge for business owners looking to manage their foreign exchange exposure. If you need assistance with this, please complete the form below and one of our Problem-Solvers will be in contact with you: