SASSA R350 Grant

Photo: AdobeStock

Rand recovery: Why the SA currency is at its strongest in five months

We’ve got good news about the Rand: It’s performing well against the US Dollar, and looks to be on a course to recovery. But what’s put a spring in ZAR’s step?

SASSA R350 Grant

Photo: AdobeStock

It’s not all that often we get to report some good news on the value of the Rand, but Thursday looks like a most-welcome exception. The currency is trading against the US Dollar at its best rate since February 2019. You know, before budget speeches and SONA events contributed to market negativity.

Current Rand to Dollar exchange rate on Thursday 11 July

Despite various issues with Eskom and other SOEs, and conservative fiscal outlooks, the Rand has shown an incredible degree of resilience recently. For the second time in a week, the SA currency has once again dipped below the $1 : R14 mark, and it has designs on setting a yearly best.

At the close of play of Thursday, the Rand was trading at R13.90 to the US Dollar. However, you have to go back to the end of January / start of February for the best of 2019. ZAR had previously reached R13.25 against its American counterpart. Here’s why our bucks are getting more bang…

Why the Rand is performing at a five-month high in 2019:

A credible rescue plan for Eskom on the cards?

The country’s economic performance is tied to Eskom, and that can be nothing short of depressing at times. However, it has worked in South Africa’s favour here. BusinessTech report the PIC wants to convert its $6.4 billion holdings into equity in return for a say over Eskom’s management, including board representation.

This, according to an expert who spoke to the publication, is “a step towards privatisation” – something that has made the currency market purr in the past 24 hours. But scepticism remains on whether this will actually happen.

Concerns in the USA

For the Rand to make gains, the US Dollar sometimes needs to make losses. Federal Reserve chairman Jerome Powell highlighted risks to the US economy which point to an interest rate cut at the end of the month. That’s a surefire way to spook the greenback in an international market, but their loss is very much South Africa’s gain.

Reserve Bank Governor here to stay

Another factor which has helped bolster ZAR is the news that Lesetja Kganyago will remain the SA Reserve Bank’s Governor for the next five years. That’s the type of institutional stability Mzansi has been craving and with a few other factors working in the Rand’s favour, it’s helped put a cherry on top of the cake.