South Africa hit by currency depreciation

Currency Calculator  App

Currency Evaluation
Virtually all currencies are moved by multiple factors such as politics, economic growth, prices of commodities, and interest rates – just to mention, but a few. All exporters, importers, investors, and foreign exchange dealers focusing on the Southern part of Africa should be concerned about the rising currency volatility in this region and watch closely the trend in the currency exchange rates

Since 2011, SA has experienced some currency depreciation as well as other nations within the Rand monetary zone such as Botswana, Namibia, Zimbabwe, and Mozambique. Perhaps this is a result of the fact that most of the nations have commodity-based currencies. In fact, commodities prices determine currency values, and there is a need to analyze commodity prices prudently to understand the exchange rate trends of the commodity-based currencies. Here is a brief examination of how various factors affect the currencies in the cited nations.

South African Rand
The South African Rand is a highly reactive commodity currency that rapidly changes when there are changes in commodity prices. The nation’s economy largely depends on mineral exports to the developed nations in the West and the Far East. As such, the dampening growth of China – one of the South Africa’s biggest importers of South African mineral produce is highly likely to lead to a decline in commodity prices. In turn, this trend implies that the SA Rand is unlikely to get stronger. Another determining factor is that the Rand is undervalued. This means that its exchange rate for other currencies is below its actual par. Of course, the South Africa’s deficit in the current account and the strong US dollar may further weaken the Rand in 2017.

Zimbabwean Dollar
Zimbabwe’s economic situations are in an adverse condition due to weak domestic demand, liquidity shortages, reduced local input supplies, weak commodity prices, and loss of skilled labor. These economic challenges are worsened by inefficiency among suppliers of major production infrastructure and resources. These problems can be traced back to the destruction of the nation’s currency (Zimbabwe dollar) balances, which formerly made up a major part of the nation’s liquid assets. The process left the citizens with only a few foreign currency balances, which were not victims to the power of expropriation of the Reserve bank. Zimbabwe’s economy heavily relies on the mining sector, but the direct interventions and restrictive controls in determining the foreign exchange rate has a significant effect on the profitability of the sector. The nation’s currency continues to plummet in value. The prospects of economic and exchange rate recovery are bleak and dependent on the growth of export earnings, and the ability of policy-makers to persuade development agencies and investors that the nation deserves economic support.

Mozambican Metical
The Mozambican Metical lost an estimated 50% of its value in 2015, and the trend has not changed for the better in 2016. Mozambican central bank made various interventions to curb inflation and stabilize the currency. The devaluation of the nation’s currency has resulted from various microeconomic and macroeconomic factors. The unstable political environment in the nation has led to reduced foreign direct investment. This macroeconomic factor coupled with a high GDM debt (60% of GDP) and a controversial payment of foreign debts, which led to the scarcity in foreign currency reserves are some of the macroeconomic factors behind the problem. The drop in international commodity prices in Aluminum and coal has also devalued the nation’s export basket while import prices have increased. The combination of these factors has lowered the nation’s exchange rate to major currencies and diminished the hopes of an appreciation.

Namibian Dollar
The Namibian dollar is valued one-to-one to the SA Rand. The Rand weakened by 13% due to declining commodity prices as the economy of China – which is one of its major trading partners - slowed down. The weakening was also influenced by an anticipated US Federal increase in reserve rate. The devaluation of the Rand has led to the consequent devaluation of the Namibian dollar, and this has led to some inflation and an increase in import costs and the fiscal deficit. The increase in import dependency and the inability of domestic supply to fulfill domestic demand paint a grim a picture for the nation’s economy and the currency’s value on the international currency exchange market.

Botswana’s Pula
The strength and exchange rate of the Pula is expected to slightly rise due to the positive adjustment of the crawl’s rate by a margin of 0.38%. The crawl rate was initially at zero as set in 2015. Though the rate increase would be minimal, the resulting relatively strong Pula would keep inflation at a low rate. However, a strong Pula would make exports more expensive. The nation’s economy is solidly based on the mining and agricultural industries and expensive imports may have a negative effect on the economy.

Any trader or investor eying any of these nations or currencies should thus make a careful evaluation of these trends as well as the government adjustments meant to stabilize the currencies in order to trade or invest prudently.

Company Details

Currency Evalation

Get a quick quote

Open Account with Halo Financial

Halo Financial are located at:
11 Ivory House, Plantation Wharf, , Greater London, SW11 3TN, United Kingdom

Get a Quick Quote

Newsletter Signup to CMT

Sign up to our foreign exchange newsletter to receive news updates directly by email

Compare Money Transfer will not Share your details!

Bank Exchange Rates Comparison

High St Bank Exchange Rate

All Rights Reserved: Copyright 2006 - 2018 Compare Money Transfer Limited offering FCA Regulated Suppliers - 34 New House, 67-68 Hatton Garden, London, EC1N 8JY. +44 (0) 843 357 4882