ild > What fundamentals drive it up?
That's a complete mystery. It may have started as a hedge against USD weakness but the dollar is now quite strong again, then possibly because of Mid East money coming into the country to escape confiscation in US/UK banks but the Iraq war is now over, and finally perhaps just because of the momentum of the trend, itself.
But now it's no longer a joke. Mining profits will be hit severely, likewise all exports. In fact, the whole competitiveness of the country, such as it is, will be severely compromised. The ANC government, however, regards the strong currency as a vote of world confidence in their policies (as one would expect them to). Next year, unfortunately, they will get a rude awakening when export revenues and tax collections fall dramatically and with that an increase in retrenchments. Of course, as usual, the whites will be blamed for sabotaging the economy and the aspirations of Africans. Clearly, there will be severe economic, social and political repercussions arising from the unwarranted appreciation in the currency.
> I remember you saying a while ago that SoAf government never liked strong Rand.
Yes, I believed after a 23 year trend (lasting from 1980) that a weak rand was endemic to the SA economy and part of "unofficial" government policy. In fact, in 1980 the rand was worth $1-40 US. In December 1981 it was worth about 8c US. Now it is worth about 13c US. So, as you see, it has appreciated by over 60% in less than 18 months.
> Too weak currency is bad, but too strong is also bad.
It seems no-one knows what the right value is. As far as I am concerned, I prefer weaker to stronger because the earnings of so many SA companies are geared to exporting and only very few individuals benefit from the strong currency. In fact, surveys have shown that the cost of imported items in the shops has not fallen at all as result of the appreciation in the currency. This means shopowners/importers are ripping-off the public who is, in fact, not benefiting from the strong rand. |
