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Don’t be fooled by the rand, plus five highlights from 'Vrye Weekblad'

Here's what's hot in the latest edition of the Afrikaans digital weekly

22 January 2021 - 07:13 By TimesLIVE
The rand is giving us a false sense of security.
The rand is giving us a false sense of security.
Image: Karen Moolman

The movement of the rand against the US dollar in 2020 is a striking example of how difficult it is for economists and investors to predict the future value of exchange rates.

This is especially true in times of great uncertainty for the world economy.

The rand closed just this side of R14/$ on December 31 2019. By April 2020 it had weakened to a record low of R19/$, yielding more than a third of its value in just four months amid unprecedented investor uncertainty about the economic impact of the coronavirus. But that was only the start of the story. On the final trading day of 2020 the currency was trading at about R14.70/$, closing weaker than at the end of 2019 despite a rally in the second half of the year.

This volatility is nothing new, writes Hugo Pienaar: “My first professional assignment was reporting on the tumbling rand in December 2001 when it traded at R13.85/$, a record low at the time, partly as the result of the terror attacks in New York and Washington three months earlier. Three years later it briefly rebounded to around R6/$.” In both cases most analysts were caught off guard.

Read more about the economy and more news and analysis in this week's issue of Vrye Weekblad.

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Another example. In the fourth quarter of 2007, leading up to the financial crisis of 2008-’09, the average trading value of the rand was R6.75/$. Just more than 12 months later, with the crisis in full swing, its trading value nudged R10/$, only to soar past R7/$ after the American and other central banks cut policy rates to the bone and pumped vast amounts of money into their economies.

The point is that the rand is extremely sensitive to major world events — and that is not to deny the significance of local events, as evidenced by the tumble to R16/$ on the memorable weekend in 2015 when Jacob Zuma replaced finance minister Nhlanhla Nene with the unknown Des van Rooyen.

Must-read articles in this week's Vrye Weekblad

AMERICA REBOOTS | The Biden era shifts the emphasis back to symbolism, tradition and the truth. As for Trump? His fate rests in the hands of the Republicans in the Senate.

COUNTING THE COST | A young maths teacher with a passion for statistics is making the dangers of Covid 19 visible to Twitter users — and helping to keep South Africans safe.

FREE TO READ — COVID 501. V2 ALERT | Elsabé Brits provides science-based answers to 10 questions about the new variant.

SA’S DRY DILEMMA | Can SA afford a total ban on alcohol sales? Can we afford not to have such a ban? Willem Kempen weighs the costs of the nation’s dry January.

POSTCARDS FROM THE EDGE | The First and Third Worlds coexist side by side in SA, but between them lies a gap as wide as the Great Karoo, writes Max du Preez in this week’s Political Notebook.