Forex Experts Confirm South African Rand’s Resilience amid COVID-19

Experts of foreign exchange markets have provided their insights regarding the South African rand’s current status. They explained and affirmed the remarkable strength of the foreign currency amid the ongoing coronavirus or COVID-19 pandemic.

 

We find this foreign exchange-related news interesting and worth sharing with our followers. We think they will be properly informed regarding the South African rand’s present performance in the currency markets.

 

Based on the foreign exchange-related report posted online by South African news outlet News24, the foreign exchange professionals sometimes refer to the South African rand as “the rattler.” This reality in currency market circles is because of this foreign currency’s habit of snapping back hard in the opposite direction to a massive maneuver. 

 

The South African rand has just posted its fifth weekly gain this month. This event has reportedly hurt people who have wagered against it. 

 

Roberto Bagnato is a Milan, Italy-based investor at Immobiliare Quadronno. He affirmed that the South African rand does not follow the rules of the emerging-markets playbook anymore.

 

Plenty of investors anticipate South Africa’s official currency to buckle in the face of surging US Treasury yields and prospects of US Federal Reserve hikes’ more aggressive pace. With this trend, Bagnato relayed that the South African rand used to be one of the weakest foreign currencies in a risk-off and volatile environment.

 

Additionally, this market veteran of more than 40 years pointed out that South Africa’s official currency was easy to short then. Bagnato explained that this reality was due to the fact that the South African Reserve Bank has a tradition of not intervening to defend the currency.

 

He mentioned that some investors are purchasing commodities currencies as an inflation hedge. Nevertheless, Bagnato cited that this strategy makes more sense for foreign currencies like the Mexican peso or the Brazilian real with a more robust link to oil and higher rates.

 

Currency market experts also attributed the South African rand’s bouncebackability to foreign investors who have been coming back to South Africa’s bond market. For five days in a row, non-residents of South Africa have been net buyers of the nation’s debt, and this reality is the most sustained spell of purchases since May 2021.

 

The inflows could carry on to be South African rand-supportive in the coming months together with a healthy trade surplus fueled by increasing commodity prices. Lars Merklin is a senior analyst at Danske Bank in Copenhagen, Denmark.

 

He pointed out that the South African rand might be getting assistance from strong commodity prices. Danske Bank also holds a long US dollar/South African rand trade. 

 

Merklin relayed that the scenario is not going their way. On the other hand, he said that every central bank is attempting to verbally tighten financial conditions.

 

However, the Danske Bank senior analyst explained that physical demand in commodities looks very sturdy and that there are most certainly positive impacts from calling the end to the COVID-19 pandemic in most developed markets.

 

We are glad to learn about the South African rand’s bouncebackability. At the time of writing, this foreign currency trades at 15.21 rand to US$1.

 

We think the South African citizens will benefit tremendously from this development as their country’s official currency has demonstrated flexibility and toughness, despite the ongoing COVID-19 global healthcare crisis, which has adversely affected other foreign currencies. 

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