South African Rand

South African Rand

The South African rand, or simply the rand, is the official currency of the Southern African Common Monetary Area: South Africa, Namibia, Lesotho and Eswatini . It is subdivide into 100 cents and the rand and cents are separate in a comma.

The South African rand (ZAR) is the currency of South Africa and is issue by the South African Reserve Bank. The South African rand has the symbol R. It is subdivided into 100 cents. The name is derived from the word ‘Witwatersrand’, which means ‘ridge of white waters’. The ridge is where most of South Africa’s gold deposits were found and where Johannesburg was built.

What characteristics  the rand?

The rand forms part of the emerging markets currency complex. It makes sense then to compare it to its peers to find clues as to whether it is being steer predominantly by global or local factors. When looking at JP Morgan’s EM currency Index over the course of this year, we see that the rand has underperformed significantly (Figure 2). You could argue that the catalyst for weakness has been a combination of global and domestic  factors. Yet, the extent of depreciation suggests that the underperformance experience relative to the EM basket can be explain by more than just the ongoing trade war and global growth slowdown.  And has been exaggerated by local factors such as weak economic data and challenges to structural reform.

Rand volatility cannot be overlook

The rand is a high-beta currency, therefore it is an important exercise to analyse the currency’s volatility. Realise volatility (the actual movement in USD/ZAR over a specific past period) tends to track the implied volatility (current market price for volatility) quite closely. Since 13 August, higher realise 6-month volatility was record. After trending lower at the start of 2019, the 6-month implied volatility began to rise at the start of August.