Rand blows out past R11/$1

The rand has plunged to its lowest level in five years amid strikes in the platinum mining industry.

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At midday today (24 January) the rand was trading at R11,13/$1, augmenting the likelihood of fuel increases in March.

Economist Dawie Roodt expected the rand to average R11,30/$1 during 2014. “I think we have hit the lowest point and the rand should recover slightly after the election. But we are talking a couple of cents. I foresee the rand going to R12/$1 by the end of next year.”

Roodt noted that the rand was still undervalued and while it might seem as if the rand is weak, it is, in real terms, not. “But at the current rate it is still bad news for everyone,” he added.

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“The exporters might win in the short term, but eventually everyone will be negatively affected by the consequent inflation and rise in food and fuel prices. Any gains exporters will make now will be eroded by input cost increases.”

Ernst Janovsky, head of Absa AgriBusiness, explained that the exchange rate was negatively affected by a lack of investors. “South Africa is not an attractive investment for foreigners. The low interest rate means that there is little reward for investors and strikes and politics make the country unstable. This combination will cause the rand to blow out.”

His prediction was an average of R11/$1 for the rest of the year. “If the ANC comes in strong during the election the rand should worsen. But if the party is weaker or is seen to be more accountable for their actions the rand could improve slightly.”

Twitter: @Lindi83