The JSE and finance forum for South Africa
General Category => Shares => Topic started by: Moonraker on May 22, 2013, 03:12:58 pm
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Causes of Rand weakness by Magnus Heystek (http://www.moneyweb.co.za/moneyweb-investment-insights/the-rand-looking-in-the-wrong-places)
The highlighted paragraph comes as a shock.
So what is causing the current run on the rand? The following factors are all lining up and already causing a bit of a gale:
The end of the commodity super cycle. Last month two large financial institutions, Citibank and Credit Suisse, published detailed reports on the commodity super cycle, both saying the cycle is dead and buried.
US Dollar (USD) strength. The USD moves in very large and pronounced cycles. I follow the ICE dollar index (code DXY on the New York stock exchange) which measures the USD against its six major trading partners. Since July 2011 this index has moved from 73 to its current level at 84 –a major move for the dollar.
SA leading economic indicators turning down. Earlier this week the Reserve Bank published its leading economic indicators, most of which had turned down in the first quarter of the year.
Deficit on the current account of the balance of payments. The slowdown in export volumes and a drop in prices of our major export products is causing havoc with the balance of payments and last year the country recorded its largest deficit on record.
Last week Treasury reported to Parliament that the budget deficit would average 6.5% of GDP over the next three years. This report, which attracted very little news analysis, points to a much higher deficit than was forecast in the budget, less than three months ago.
Outflow of foreign money from the local bond market. This, in my view, is the single most important indicator when it comes to the outlook for the rand. The rand has been propped up by the billions of foreign currency flowing into our bond market. Any return of this money back to home base, which could happen if global interest rates normalise, could be disastrous for the rand. Then the current strong gale would turn into a force-10 hurricane.
Smart investors can turn such a scenario into their advantage and profit by buying rand-hedge investments or taking some money abroad. There are a number of excellent offshore funds and exchange traded funds on the local market.
As Ian Liddle, chief executive of Allan Gray said on this website two weeks ago: invest at least 25% of your pension offshore. I think this number should be higher.
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At the current exchange rate I would not hedge now. Too late I think.
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???
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Here's the last 10 years of the Rand (http://cdn.tradingeconomics.com/charts/south-africa-currency.png?s=usdzar&v=201511301010o&d1=20050101&d2=20151231)
What chance could there be that it will eventually come back to R12 or better?
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If commodities recover strongly (unlikely, these cycles last a very long time), then there might be a temporary uptick. But we still have the Zuma/Davies version of economics, plus inflation differential means the Rand will not get lucky for any sustained period. Historical Xchange rate vs. $ tells it all and I certainly wouldn't bet against the long term trend.
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I wonder if SARB will up the interest rate to help the rand?
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Your Xchange Rates till Monday.
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I am impressed Mr Bond.... :TU:
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Is this red candle due to SONA?
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But that Ted candle indicates a strengthening rand. Maybe Zuma is stepping down haha.
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Some members of MyBroederBond may be members here but I would like to share my post on this forum as well as they are closed knit and do not like outsiders comments and band together to ridicule them.
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As I was saying earlier on. The ZAR corrects very quickly after each peak against the USD. This has now clearly happened and is ongoing. The daily highs have been lower and the daily lows has been lower over the past 4 weeks. Is this not an indication of the ZAR strengthening?
I pity those that panicked at the peak and went into USD. I stood my ground and stayed in ZAR.
Those posters that proudly shouted "I bought NEWUSD and DBXUS" are strangely quiet now as they nurse their wounds.
We will get back to the normal 2,5% pa weakening when this correction is done. This is not bad as investors will soon pile back into emerging markets and this seems to have started.
Emerged markets cannot grow at the rate of emerging markets and the savvy investors know this. The recent exodus was only due to fear of world markets tumbling but this is now unfounded as there are no similarities in this market to any previous market crashes. Will not happen.
The ZAR weakening to 25 soon is your own nightmare that only you will dream.
End Quote.
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I knew it!!! :D
Feel free to ridicule them though. In the past I've posted the same questions here and over there and the quality of responses are vastly different.
Regardless...
One should phase your offshore investments just like anything else and avoid lump sum rash decisions like pushing the bulk of your investments offshore when the Rand hits record lows (and NEWUSD, why ever?)
The same is happening with those punting gold. When it starts crasdhing hard there will be lots of tears over there.
Sent from my LG-V490 using Tapatalk
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I nearly did just that, but thanks to some level headed here and on moneyweb I held back. My plan is to still eventually move everything offshore mostly because I plan to be a perpetual traveller, but I'll most likely do it in bits and pieces to spread the risk and to keep taxes as low as possible.
Unless of course we miraculously hit R12/$, that would be very hard to resist!
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I read somewhere today that the ZAR could quite possibly strengthen to below R13 or even R10 to the USD. I think it was Moneyweb.
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I read somewhere today that the ZAR could quite possibly strengthen to below R13 or even R10 to the USD. I think it was Moneyweb.
Yes - I read that as well - but it was issued by a financial advisor or an "economist" or an actuary or a politician :LHST: :LHST: So no real credence there :'(
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I read somewhere today that the ZAR could quite possibly strengthen to below R13 or even R10 to the USD. I think it was Moneyweb.
Yes - I read that as well - but it was issued by a financial advisor or an "economist" or an actuary or a politician :LHST: :LHST: So no real credence there :'(
Roodt?
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I read somewhere today that the ZAR could quite possibly strengthen to below R13 or even R10 to the USD. I think it was Moneyweb.
Yes - I read that as well - but it was issued by a financial advisor or an "economist" or an actuary or a politician :LHST: :LHST: So no real credence there :'(
Roodt?
Nope not him he doesn't want to be shot again >:D
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If commodities recover strongly (unlikely, these cycles last a very long time), then there might be a temporary uptick. But we still have the Zuma/Davies version of economics, plus inflation differential means the Rand will not get lucky for any sustained period. Historical Xchange rate vs. $ tells it all and I certainly wouldn't bet against the long term trend.
. CHECK
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The Rand UP, JZ DOWN, http://www.moneyweb.co.za/news/south-africa/zuma-ordered-to-pay-nkandla-costs/
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The NFP result does not affect markets as much as it used to a year ago but it does affect the currencies. This may only last for 2 to 3 trading days.
The poor results caused the exodus from the USD perhaps due to the expectation that the FED will now not raise the interest rates next month.
This may also mean that the EM's will come back in favour to an extent but time will tell as USA bad news is bad for all markets.
The chart below is typical of FX news trading where panic sets in and sends the pair in the wrong direction. The pro's and con's are then mulled over and then clever money climbs in.
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Even at this 13,8 rate, the ZAR remains oversold. The USD is overbought as well. My prediction of 13,7 is taking longer than I expected due to the hiccups made by Zuma, Hawks and Brexit but is still on course and as long as EM's stay in favour, the ZAR could well go lower than I expected.
The popular Big Mac Index shows that the ZAR could be worth 5,85 but that is a bit far fetched and where will the ZAR start to turn back after 9 months of gains is beyond me. It has momentum to go further though.
The "experts" say 17 at year end and Chris Hart is calling 20. Have they ever been correct? I am by no means a financial person but I see sub 13,7 soon.
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The ZAR did not embarrass me and today she reached my 13,7 target.
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Still hoping it will go closer to R12/$
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If the poor election results cause a Zuma recall you might get that gcr.
Orca, now that it's at your target will you be doing anything or is it just a psychological thing?
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No P. It was just me drawing silly lines on a chart of the USD/ZAR. The competition with myself is over now and I will just watch it.
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Rand euphoria will in my opinion not last. I think ANC will form coalitions with EFF who have gained more since 2011 percentage wise than the DA. So it's up to the ANC, will they move more towards the redistributive policies of the EFF or embrace the more market friendly DA policies. Both ANC and EFF are anti 'white monopoly capital' etc.
Of course if such a coalition would happen, they will screw up to such an extent that DA will gain even more come 2019.
Z. will reshuffle his cabinet - let's see what happens.
My year end R/$ est. is ± 15 unless resources really shoot the lights out. But we will be downgraded.
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I agree to disagree. The ZAR shot up over the 14 mark after the NFP results but she proved her resilience by gaining most of it back within hours. This is proof enough for me that the ZAR will still see 12 soon and the election results will edge her on.
The EFF asked it's supporters who it should go into a coalition with and when I last looked it was 69% for the DA and 16% for the ANC. Even the EFF now trusts the DA over the ANC as the DA can no longer be seen as a white party due to the volumes of black supporters that are obviously in its fold.
I don't trust Malema but I'm sure he will do what his supporters want. He is clever in that respect.
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I think it all tests with how the ANC respond to these losses. If Zuma stays and Gauteng tales the fall the rand will fall too. If Zuma goes we could see R12 something again.
It's hard to tell at the moment where we are headed at the moment.
As for the poll, it wasn't quite an eff pool, just a Twitter poll. I voted on it for the DA coalition, and I imagine every other DA Twitter user did the same!
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Holy s*** My Rand hedge stocks. £ is even worse.
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Same FFS .... :wall:
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I'm by no means blowing my own trumpet here but the people that have sent their money to the US are now feeling the pinch.
This is not bad as the ZAR will eventually reverse.
In the mean time, I will continue to invest in SA as an emerging market. EM's are future Emerged Markets.
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R13.37/$ now!
Part of me is cursing my missed opportunity, but with the big picture it's not too bad. Half my money was in DIVTRX, it's still doing fine, the other half was in STXIND which has been hit by the strong rand. I also remember how I felt last year after Nenegate. I was so down in the dumps, I thought if only I could've sold yesterday... if it ever gets back to those levels I'm out of here. That level was R14.50, I moved my money at R14.30, so I can't really complain. Dawie Roodt also said he'd buy $ at R14.50 and buy rand at R16.50. He's an expert. Apparently.
Now what's changed. Let's see, the JSE has owned up to making a massive screw up. There's no record inflows, it was all a computer error. The reserve bank has said growth won't be 0.6% anymore, it's now 0% yet the rand gets stronger :wtf:
The only thing I can confirm, is that nobody has the faintest clue what is going to happen going forward. Junk status in December? Possibly? Probably? Who will win the fight for control of the ANC, Cyril? Or maybe Zuma will get even stronger and get rid of the Gauteng leadership ensuring that he can pick his successor, or even keep his seat as ANC president.
I'll stick with the statistics in my investing. You can't pick shares and beat an index. You can't pick an economy and beat the global average. The rand should depreciate by the inflation rate differential.
I'm sad I didn't move my money at the bottom, but I still earn in Rand, so I'll be using the stronger rand to keep investing in my low cost global fund. The Rand has just given me a raise in dollars to do that with.
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I'm by no means blowing my own trumpet here but the people that have sent their money to the US are now feeling the pinch.
This is not bad as the ZAR will eventually reverse.
In the mean time, I will continue to invest in SA as an emerging market. EM's are future Emerged Markets.
I sent money to the US twice last year, the first time at R11.30, second time at R14.20 (same as you Patrick). I'm still up 20% in the stocks I bought. I'll be buying more USD if the Rand strengthens a bit more (ie if under R13) and investing in ETF's. I forget the exchange rate that I bought the USD for because you just cause yourself unnecessary pain thinking about what the Rand could have done. I just want more bang for my buck.
I measure my wealth in the big three (EUR, USD, GBP) and so far I been better off investing offshore than local.
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Here's a 10 year chart of the rand dollar. For a long time it was pretty flat except for 2008, but then in 2011 it just started climbing steadily. Anybody know why?
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EM's went out of favor at that time. They came back in favor about 9 months ago.
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I forget the exchange rate that I bought the USD for because you just cause yourself unnecessary pain thinking about what the Rand could have done. I just want more bang for my buck.
I measure my wealth in the big three (EUR, USD, GBP) and so far I been better off investing offshore than local.
Well said Conrad, I also promised my wife I'd do the same. The rate reached a level where I could convert and have a number in $'s I was happy with, so it's time to move on!
Any strength from now is more bang for buck as you said.
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I found this interesting article on Biznews written by Brian Kantor from Investec. Puts some of the gains in the rand into perspective.
http://www.biznews.com/sa-investing/2016/08/11/brian-kantor-local-lekker-rand-gains-declining-sa-specific-risks/
Sent from my E5823 using Tapatalk
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With the Rand at these levels firstly where do you think it will bottom?
Would you be selling your STXIND/CORONATION ETF's to buy either dollars, sterling or euros in order to capitalise on the Rand weakening by year end or is it too much of a gamble?
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The ZAR may return to loosing +- 2,5% pa against the USD again unless some severe political events happen in SA.
Emerging markets like SA are growing markets. Developed markets like the US are already developed so in my view, there will be much more growth for SA than there will be for the US. Long term charts are proof of this.
Some 2 years ago, I posted a question on a UK investment forum Citywire asking what ETF in the UK has a history of 20% + returns. I got laughed at. "Forget it" they replied...."impossible".
At that stage the STXIND was returning 32% on average over many years.
The choice is yours as you may have different plans ahead like Patrick.
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Fin24
//The rand has strengthened below key resistance at R/$13.50 and is now comfortably below the 50-, 100- and 200-day moving averages.
The rand’s momentum indicators are not confirming the rand’s new lows versus the dollar and therefore a sustained break below R/$13.20 is unlikely.
The rand must break above R/$13.60 to indicate that the bottom has been reached.//
It is now 13.80.
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Orca, my thinking has been that the STXIND YTD return has been very low but a few factors have contributed to that and I was looking at selling my STXIND shares to either buy sterling or buy shares on the FTSE over a short period of time allowing the Rand to weaken again which I'm sure it will given time
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Thank you cANCer for making me a quick 2% on the money i took offshore yesterday. Whew! :'(
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Fin24
//The rand has strengthened below key resistance at R/$13.50 and is now comfortably below the 50-, 100- and 200-day moving averages.
The rand’s momentum indicators are not confirming the rand’s new lows versus the dollar and therefore a sustained break below R/$13.20 is unlikely.
The rand must break above R/$13.60 to indicate that the bottom has been reached.//
It is now 13.80.
The Rand is way over R14/$ now so would you say the bottom has been reached and it will get weaker from here?
Also, if given the choice would you buy dollars, sterling or probably less of a choice, euros?
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Impossible to call. Is the current weakening of the ZAR due to Zuma/Hawks and Gordhan saga? Will the ZAR continue to decline until that saga is done and dusted then gain to sub 13 again?
We must also take into account that talk by the FED about increasing interest rates has given the USD a boost and the ZAR has not really weakened as much as it appears to have done. The ZAR stood still today but the USD gained 1,4%.
I would not buy GBP or EUR due to the uncertainty of Brexit and the migrant crises. The USD and YEN would be safer in my personal view.
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The ZAR's weakest link is Zuma. Zapiro will get much flack now.
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As of now the ZAR has gained over 2% for the day and we have had 6 consecutive days of gains. Now who in their right minds will short the ZAR after a 9 month bull run.
Some traders do but only after an anomalous short term sharp strengthening and getting in on the rebound making it volatile.
Had it not been for our number one doing a No. 1 on the ZAR in his Nkandla toilet we would have a much stronger ZAR.
Interest rates in developed countries are next to nil and even negative so what do the fund managers do? Invest in EM's that have a superior interest rate at 6 to 8%. A no brainer for them. This will strengthen the ZAR.
To top it all, InBev has almost more money than the SA reserve bank has and now has to buy ZAR to pay the investors in ZAR.
This will take weeks of buying so expect more upside for the ZAR.
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I listened to some analysts last night talking about where the Rand is headed and they were saying a realistic level would be R12/$ but they think it will bottom around R13-13.20 in this current cycle
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The rand may be cheap versus its theoretical “purchasing power parity” (PPP) level but not by much. According to the PPP model the rand is only 6% cheaper than its fair value of R/$12.80. Following the “Nenegate” debacle last December the rand was 25% undervalued. Admittedly the rand has at times overshot its fair value. For instance, in mid-2010 (during the FIFA World Cup) the rand was 15% above fair value. However, given the threat of a sovereign credit rating downgrade to sub-investment grade, and an economy teetering on the edge of recession it seems unlikely that the rand should be anywhere close to its PPP fair value.
Despite the steady underperformance of “rand hedge” shares since the start of the year, coinciding with the rand’s appreciation, we would recommend exercising patience. The rand hedge stocks listed on the JSE typically exhibit sound prospects in their own right, not only appealing for their rand hedge credentials alone. With the JSE ALSI 40 index now deriving over 70% of its earnings from offshore, an absence of rand hedge shares in an investment portfolio would put it at considerable risk of underperforming the market benchmark.
Given the extent to which the rand has closed-in on its theoretical fair value in spite of the near-recessionary economy, looming credit rating downgrade and rising political uncertainty, the current rand strength offers an excellent opportunity to diversify into offshore markets.
Source: Overberg Asset Managers.
Orca, take note PPP 8)
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I'm digressing a bit here but I started with Rands and bought a fair amount of Dollars last week but now I'm looking at buying Sterling with the Dollars with the rate at the moment down to $1.23 to the pound the lowest it's been for years if not ever would you go this route or stick with the Dollars?
My aim is to buy ETF's in Dollars offshore but looking at the Sterling price at $1.23 it's attractive and would just buy the ETF's in Sterling and most of the analysts are saying Brexit is already built into the price and it should be bottoming soon but if I'm going to buy then I'd do it now as a few more cents drop in the rate won't make much difference.
Any opinions? Thanks in advance
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I would wait for the uncertainty to pass first.
PROS:
1.The cheap £ will attract more tourists next summer. This will be good for the £.
That's it.
CONS:
1.UK needs 80 000 seasonal fruit and vegie pickers from eastern Europe from July to December. The locals will not do it.
Last summer the agencies could not fill the quota and it is expected that due to the exchange rate, the pickers will stay in Europe mainland countries like Germany and Scandinavia this coming summer.
Farmers will be forced to watch their produce rot and businesses will have to import foods and even beer, wine,vinegar etc.
This will cause prices to rocket and bad for the £.
2. London is the financial hub of Europe and banks will move their HQ's to the continent. One bank has already vacated taking 2 000 employees with them. Bad for the £.
So it is a gamble in my view.
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I'm digressing a bit here but I started with Rands and bought a fair amount of Dollars last week but now I'm looking at buying Sterling with the Dollars with the rate at the moment down to $1.23 to the pound the lowest it's been for years if not ever would you go this route or stick with the Dollars?
My aim is to buy ETF's in Dollars offshore but looking at the Sterling price at $1.23 it's attractive and would just buy the ETF's in Sterling and most of the analysts are saying Brexit is already built into the price and it should be bottoming soon but if I'm going to buy then I'd do it now as a few more cents drop in the rate won't make much difference.
Any opinions? Thanks in advance
Is it the same ETF? If it's something like VWRD in $ or VWRL in pounds it'll make no difference which currency you buy in. The price is dictated to the underlying economies, and with the pound looking weak the pound price will be slightly higher.
But if you're investing in the FTSE 100 vs investing in the S&P 500 then the currency will make a difference. Whether it is a good difference or a bad one is something I can't predict though.
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Thanks guys you make some good points and think I'll wait a while to see what Sterling does
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Oops made a mistake above, I meant to say "VWRD in $ or VWRL in pounds". I've edited it.
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I would wait for the uncertainty to pass first.
PROS:
1.The cheap £ will attract more tourists next summer. This will be good for the £.
That's it.
CONS:
1.UK needs 80 000 seasonal fruit and vegie pickers from eastern Europe from July to December. The locals will not do it.
Last summer the agencies could not fill the quota and it is expected that due to the exchange rate, the pickers will stay in Europe mainland countries like Germany and Scandinavia this coming summer.
Farmers will be forced to watch their produce rot and businesses will have to import foods and even beer, wine,vinegar etc.
This will cause prices to rocket and bad for the £.
2. London is the financial hub of Europe and banks will move their HQ's to the continent. One bank has already vacated taking 2 000 employees with them. Bad for the £.
So it is a gamble in my view.
Orca, all over Sky news now about the banks pulling out
Would you think Sterling will drop further against the Dollar? I read one forecast of $1.09! Not so long ago it was double that!
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UK gov. may propose a 10 % company tax cut (from 20%) to ameliorate the Brexit malaise. If that happens UK will become very attractive, even for EU based companies. Also the interest rate may not be cut again as inflation is picking up due to the weak pound.
I think the bulk of pound deterioration has already occurred.
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@P. There is no reason for the zar to reverse its bull trend unless shower head fires Pravin after his speech. I doubt he will do that as it will surely look like fiscal capture. All major resistance levels have been breached so we may see sub 12 soon.
Modify message
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I want sub R10
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i WaNT sub R14.00 >:( :wall: :whistle:
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i WaNT sub R14.00 >:( :wall: :whistle:
I am confused
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i WaNT sub R14.00 >:( :wall: :whistle:
I am confused
Ja nee... :wtf:
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I have NPN and CCO. Hence the wanting weak rant, also I do not like Happy people, and in my job I fight for work against cheap Chinese imports, thus weak rant help me, :TU:, sub %$#@ R15.00
I do the 52week challenge, where I have to do something every week which I have not done before. Attached is a Cartoon I did because of that.
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Please can we get R10 please
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Please can we get R10 please
Jy soek moelikheid nou !!!
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What is the longest time you can go long on Forex?
I mean there's not a lot of guarantees in life, but in the long term the zar will always weaken against the USD.
So a geared position going long for 30 years should yield a interesting result no?
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What is the longest time you can go long on Forex?
I mean there's not a lot of guarantees in life, but in the long term the zar will always weaken against the USD.
So a geared position going long for 30 years should yield a interesting result no?
Betting money on Forex is an excellent way to lose a lot of money. Been there, got the T-shirt.
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Even at R13.00 the zar remains oversold. She may head for R12.00 or less and you would get a margin call.
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What is the longest time you can go long on Forex?
I mean there's not a lot of guarantees in life, but in the long term the zar will always weaken against the USD.
So a geared position going long for 30 years should yield a interesting result no?
Betting money on Forex is an excellent way to lose a lot of money. Been there, got the T-shirt.
Is that true for a USD ZAR currency pair @ 20 years?
I am willing to bet anyone the zar will continue to weaker the coming 20 years
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I am willing to bet anyone the zar will continue to weaker the coming 20 years
What you say there, no one will dispute and it is a no brainer but it will only do so after the zar has reached fair value. That could be R11.00 or R12.00 but once reached she will start weakening by the normal 2,5% pa again.
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I am willing to bet anyone the zar will continue to weaker the coming 20 years
What you say there, no one will dispute and it is a no brainer but it will only do so after the zar has reached fair value. That could be R11.00 or R12.00 but once reached she will start weakening by the normal 2,5% pa again.
Admittedly I am a noob no a complete amateur when it comes to currencies. How does fair value work? How do I work it out?
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I have a slightly different view to Orca. Current fair value ± 12.80 and predict 14.50 by year end (sans any political shenanigans).
Annual 'guaranteed' depreciation due to inflation differential between US and ZA - say close to 4%.
See graph. (Click on image to enlarge)
(http://thumbnails117.imagebam.com/53388/644987533872416.jpg) (http://www.imagebam.com/image/644987533872416)
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Is that true for a USD ZAR currency pair @ 20 years?
I am willing to bet anyone the zar will continue to weaker the coming 20 years
The USD is currently the world reserve currency, this makes the USD very strong, because everybody holds some of it (important commodities are priced in dollars, like oil). If this changes, the dollar may nose dive quite a bit.
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As per Moneyweb about a month ago: The Big Mac Index is a widely used and accurate index for Fair Value. The BM Index shows the ZAR to be fair value at 8.00
This correlates very well with Moons chart. If you extend the average chart inclination prior to when the ZAR became so volatile it would be at 8.00 now.
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Very insightful. Way to complicated so I will just continue to buy bitcoin 8)
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What does the Big Mac Index really measure? (http://theweek.com/articles/451922/what-does-big-mac-index-really-measure)
(In other words there are too many variables for the index to be really meaningful).
A further huge boost to resource prices might get us closer to Orca's R8.00 :)
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I'm not saying it will get to 8.00 by a long shot. Fin24 BM Index showed the ZAR to be fair value at R5.84 in July last year but the economic growth and political climate has not been factored in.
http://www.economist.com/content/big-mac-index
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I'm not saying it will get to 8.00 by a long shot.
I know. :)
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Very insightful. Way to complicated so I will just continue to buy bitcoin 8)
what IS your average u paid per coin about? (if I may ask)
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I'm not saying it will get to 8.00 by a long shot. Fin24 BM Index showed the ZAR to be fair value at R5.84 in July last year but the economic growth and political climate has not been factored in.
http://www.economist.com/content/big-mac-index
Okey so in the real world, what does fair value mean? It doesnt appear to be something that is at all possible to attain?
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Very insightful. Way to complicated so I will just continue to buy bitcoin 8)
what IS your average u paid per coin about? (if I may ask)
I am too scared to disclose it because when I tell people I paid about $5 - $8 for it as a novelty back in 2011 most think its BS others get nasty jealous/jaded and now it is an essential part of my retirement plan as you can imagine. Granted I did not buy 100 bitcoins, regrettably... I might add.
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Okey so in the real world, what does fair value mean? It doesnt appear to be something that is at all possible to attain?
With FX it is difficult to say and that is why the hamburger index was invented. :)
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Okey so in the real world, what does fair value mean? It doesnt appear to be something that is at all possible to attain?
With FX it is difficult to say and that is why the hamburger index was invented. :)
Don't be offended, but so fair value is basically useless?
Since I cannot go to absa and say hey! I am going to murica please give me 100 fair value worth's dolla please.
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Forget about fast food and look at it this way:
SA has a trade surplus. ie...Exports exceed our imports. So foreigners are buying SA products more than what we are buying from them.
This is good for the ZAR as they are buying ZAR via products. The ZAR will keep strengthening as long as we have a trade surplus. The revival of the commodity sector (SA is commodity driven) is the main driving force of the ZAR increasing in value.
Negative local political news will drive the ZAR down but as long as we have a trade surplus it will eventually regain lost ground depending on the severity of the news.
This can get complicated when comparing to currencies other than the USD.
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Forget about fast food and look at it this way:
SA has a trade surplus. ie...Exports exceed our imports. So foreigners are buying SA products more than what we are buying from them.
This is good for the ZAR as they are buying ZAR via products. The ZAR will keep strengthening as long as we have a trade surplus. The revival of the commodity sector (SA is commodity driven) is the main driving force of the ZAR increasing in value.
Negative local political news will drive the ZAR down but as long as we have a trade surplus it will eventually regain lost ground depending on the severity of the news.
This can get complicated when comparing to currencies other than the USD.
That I understand, but I feel that is a flawed economy, because... Correct me if I am wrong, but does this not basically mean we export our raw materials for next to nothing and then we buy back the expensive refined and processed products?! Thus we will never make money as exporting to buy back the end product will always be more expensive.
Should government not start creating companies that can use our raw resources to manufacture products we can sell to other countries instead of other countries buying our raw resources for bottom price and then they manufacture products and we end up paying 10 times more to buy those products which we could've manufacture our self?
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What TF? Here is my reason for not exchanging my money to USD. I did warn you.
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@Orca what do you think of my reasoning above? Am I completely missing the point or am I on the right track?
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@Orca what do you think of my reasoning above? Am I completely missing the point or am I on the right track?
I can't find your post on this thread.
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@Orca what do you think of my reasoning above? Am I completely missing the point or am I on the right track?
I can't find your post on this thread.
Oh no. My mistake, this is the investor challenge forum I am in another thread with a similar name on taptalk I mistook this one for that one.
Might as well post it here. Is a strong rand not better? Fuel remains one of the universal inputs which affect the price of almost all goods. It affects the spending power of consumers broadly, too, especially at the lower income levels where taxi fares can cause real headaches for many people.
So, while the rand strength may be affecting exports, it is substantially contributing to stable fuel prices as oil approaches the US$60 per barrel mark; imports, too, become more affordable not? Should SA not strive to rather bring down the cost-to-consumer giving people more buying power and thus new business will flourish and exports will naturally continue to grow we have the raw materials that is not going anywhere and the demand will continue to go up so they will pay the higher price as the rand strengthens a sort of SA first policy.
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You are quite right Jack. A trade surplus is good for the ZAR. Great for Industrials, Resources, employment figures etc.
It cannot last though as exports will decline as the ZAR strengthens. At some stage foreigners will see SA goods as too expensive and the Trade surplus will ease off and continue as a trade balance before it goes into a deficit.
I am by no means an economist and I loath the subject but inflation also comes to play as it affects interest rates that affects the trade balance that ......
Talking about "economist", Chris Hart has eaten his hat twice now. Last year he stated the ZAR will reach R20 by year end (2016). Well, I suppose we were all caught out with the revival of commodities.
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That I understand, but I feel that is a flawed economy, because... Correct me if I am wrong, but does this not basically mean we export our raw materials for next to nothing and then we buy back the expensive refined and processed products?! Thus we will never make money as exporting to buy back the end product will always be more expensive.
Should government not start creating companies that can use our raw resources to manufacture products we can sell to other countries instead of other countries buying our raw resources for bottom price and then they manufacture products and we end up paying 10 times more to buy those products which we could've manufacture our self?
Not all exports are resources/commodities. I work in the service sector and we export intellectual property for vast sums of money. The service sector is by far the largest sector in SA and I suspect a lot of trade is in IP.
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That I understand, but I feel that is a flawed economy, because... Correct me if I am wrong, but does this not basically mean we export our raw materials for next to nothing and then we buy back the expensive refined and processed products?! Thus we will never make money as exporting to buy back the end product will always be more expensive.
Should government not start creating companies that can use our raw resources to manufacture products we can sell to other countries instead of other countries buying our raw resources for bottom price and then they manufacture products and we end up paying 10 times more to buy those products which we could've manufacture our self?
Not all exports are resources/commodities. I work in the service sector and we export intellectual property for vast sums of money. The service sector is by far the largest sector in SA and I suspect a lot of trade is in IP.
We need that genius here! Dammit.
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This is the closing price of USD/ZAR on FXCM. Wonder why this happened.
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This is the closing price of USD/ZAR on FXCM. Wonder why this happened.
As stated previously I bought dollars at R14.50 a very big mistake so in trying to cut my losses a bit I bought Sterling last week at 1.22 hoping for a short term rise to 1.27-1.30 and a possible buy back at that rate or would you sell the Sterling for another currency maybe?
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UK and £ going nowhere now and in the future - unless the EU disintegrates.
The pound is set to plummet as Brexit negotiations begin, amid fears of a lengthy stand-off between the UK and the European Union, City bankers are warning this weekend.
Already down about 18 per cent since last June's referendum, some analysts believe it will fall further in the coming months, stoking inflation and bringing more pain to those going abroad this summer.
Theresa May is poised to trigger Article 50, setting in motion a two-year process leading to Britain's exit from the EU.
But City experts fear no progress will be made on trade talks for months, amid tetchy rhetoric on both sides as the remaining EU members try to extract a £60 billion 'exit bill' from the UK.
Viraj Patel, a currency strategist at bank ING, said: 'Initial Brexit negotiations could see both sides playing hardball and seeking to protect domestic interests.
The pound would bear the brunt of the greater political uncertainty.'
Patel expects the pound to fall to as low as $1.15, against $1.23 today. A stand-off would also hit the euro, but by a smaller amount, meaning holidaymakers travelling to the eurozone over the summer will see the cost of their holidays rise, possibly getting €1.11 for every pound rather than €1.15 currently.
Patel warned there are other big risks for sterling. A Scottish referendum prompting the chance of the break-up of the UK would drag the pound as much as 8 per cent lower against the dollar, while sterling's reserve currency status is also under threat.
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I bought dollars at R14.30, a better price than any in the year previously, I'm so smart :wall:
I'm still buying though, so at least I'm averaging down. A few days ago I bought at R12.70. Now I need to save up some more so I can average out some more with my next purchase. I'll be doing that for a few more years so I'm not too concerned that I didn't pick the market perfectly.
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Still hoping it will go closer to R12/$
Slowly getting there 8)
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Any predictions on where the Rand will end up when Pravin gets bulleted?
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Any predictions on where the Rand will end up when Pravin gets bulleted?
Could go as high as R 15/$ if he is bulleted and crybaby Molefe is brought in as that would confirm total state capture, and it could get worse once the country is downgraded