Countering rand volatility in 2021

2020 was a world-changing year in many ways as the coronavirus crisis caused chaos, inspiring national lockdowns around the world and extreme economic and social upheaval. 

Financial markets also experienced dramatic volatility, with the currency market in particular recording significant movements. 

As a higher-risk currency the rand’s shifts were particularly notable. 

Rand struggles as investors flock to safe havens 

The USD/ZAR exchange rate was trading in the region of 14.3954 at the start of 2020, but by March the rapid spread of COVID-19 and fears about the impact of global lockdowns had sent investors flocking to the safe-haven US dollar. USD/ZAR peaked at 19.2636.  

While the weakness in the rand was good news for anyone purchasing ZAR, it was bad news for anyone moving funds out of South Africa. 

However, by the final quarter of last year hopes surrounding the roll out of coronavirus vaccines and Joe Biden’s US election victory renewed demand for higher-risk currencies and the rand was able to stage an impressive comeback. 

According to Dr Roelof Botha, Economic Advisor to the Optimum Investment Group: ‘Since November, emerging market (EM) currencies have taken revenge for the beating they took during most of 2020. The South African rand is leading the pack of recovering EM currencies, posting an impressive 30% gain against the US dollar between 6 April and 31 December.’ 

How are currencies expected to perform in 2021? 

Whether or not higher-risk currencies like the rand are able to retain their recent strength largely depends on how the coronavirus crisis develops. 

At the moment new variants, including the South African strain, are providing fresh cause. 

Additionally, while the roll out of the vaccine in some areas means lockdown restrictions may be eased in the future, the timeline for reopening economies is still unclear and some nations have no set vaccine programme or targets in place. 

If the global economic outlook fails to improve in the weeks and months ahead currencies like the rand could come under pressure. 

Protect your currency transfers from exchange rate volatility 

If you need to move money to or from South Africa in 2021 you may wish to discuss your requirements with a leading currency transfer provider. 

Currency transfer specialists can keep you informed of the latest exchange rate movements and help you pick the right time to move your money. 

With some transfer specialists you’ll also gain access to a range of tailored services not available with most banks. This includes free SARS tax clearances, full SARS, SARB and exchange control compliance and completing and sending your exchange control submissions. 

You can even use services like rate alerts and forward contracts to target specific exchange rates, all while benefiting from more competitive exchange rates and no transfer fees. 

Considering your currency transfer options sooner rather than later can make a massive difference, so it really pays to talk to the experts early. 

If you need to make an international payment and want to make your funds go further, get in touch with the team at Currencies Direct and have a chat about your requirements. Email infosa@currenciesdirect.com or call +27 (0) 21 418 0105. Currencies Direct have been providing market-leading currency transfer services since 1996 and employ over 500 currency experts.