Allan Gray usually repatriates US dollars when the rand weakens rapidly to buy the local currency, but not this time.Allan Gray says it usually repatriates US dollars when the Rand weakens rapidly, to buy the local currency.Old Mutual also believes the Rand has priced in a global crisis, and so any upside surprises would be good for it.The South African Rand has consistently traded at levels above R18/$ for more than a month now. After, many analysts agree it's oversold.
"In the past three weeks, we haven't been doing that. The dynamics have changed. The risks have increased, and we think the next six months could be tough," said Munsie.A deep dive into the big business story of the week, as well as expert analysis of markets and trends.The Rand has seen large losses in the past - depreciating by 28% in nominal terms against the US dollar in 1998 and by 26% in the last quarter of 2001.
The Johannesburg Stock Exchange all-share index lost a third of its value between May and August that year, and government bond yields shot up to nearly 20%. But the South African economy had been growing, and still expanded by 0.5% during the 1998 crisis and by 2.7% in 2011."If you strip out that inflationary effect, where the Rand is now is not too dissimilar from 2001, and also during Nenegate.
"Whenever there is a US recession, the Rand tends to crash. Also, where the Rand is now is where it was during the [past three US recessions]. So, the Rand is pricing in a very negative scenario. The Rand is already at crisis levels," he said.Citadel Global believes that given where it is now, there is a bias for a strengthening of the currency in place.