Apex Viewpoint: What’s Happening With The Rand?

The Rand appears to have plummeted against the US Dollar over the past few months. Does this signify the state of the South African economy, loadshedding or are there other forces at play?


A year ago the Rand was at R14.83 to the US Dollar and today it’s R18.43, more than a 24% drop.

When we look at the Rand against the British Pound or the Euro however, we see a very different story. The Rand is flat against the Pound and only marginally weaker against the Euro.

This demonstrates that it’s not the Rand that is weakening, but instead the Dollar strengthening. In fact, over the past year the US Dollar has strengthened by 22% against the Pound and 18% against the Euro. It is now at highs against those currencies not seen for more than 20 years.

When investors are nervous about the state of the global economy, they retreat into the perceived safety of the US markets and the Dollar. Over the past year we have seen the war in Ukraine, soaring energy prices, high global inflation and interest rate hikes, all of which could lead to a recession.

The Pound has also had a tough time recently, with the high energy prices weighing negatively on the UK economy as well as the ongoing uncertainty around the next prime minister.

We are reminded that markets and currencies move in cycles, so we can expect some reversion to “normal” at some stage. When this will happen is anybody’s guess in the current state of global upheaval. It also reminds us that while the state of the South African economy can sometimes add to the problem, the currency is at the mercy of global events.

When investing offshore there is always the added volatility of the currency to consider, and a long term mindset is crucial. This is a time to be patient and allow events to unfold.