Index shows rand is undervalued against dollar (2024)

FAQs

Index shows rand is undervalued against dollar? ›

"The implied exchange rate is 8.94. The difference between this and the actual exchange rate, 17.78, suggests the South African rand is 49.7% undervalued," The Economist says. A year ago, the rand was 55% undervalued. South Africa has often been the world's most undervalued currency, and in 2020 was undervalued by 70%.

The rand's fair value ranges between R14. 55 to the dollar and R16. 99 to the dollar, meaning the market currently undervalues the rand due to South Africa's poor economic performance and deteriorating state finances.

Depreciation Effect on Returns: When the Rand devalues against the Dollar, the value of Rand-denominated assets in international terms diminishes. This depreciation translates to lower returns when converted to foreign currencies like the USD.

Basic Info. US Dollar to South African Rand Exchange Rate is at a current level of 18.40, down from 18.47 the previous market day and up from 18.25 one year ago. This is a change of -0.36% from the previous market day and 0.84% from one year ago.

Based on differences in GDP per capita, the index suggests the rand is 41% undervalued, and its 'real' and fair value should bearound R11. 32 to the dollar. Under-valued? A currency is considered undervalued when its value in foreign exchange is less than it “should” be based on economic conditions.

Easing load shedding and economic resilience

The strengthening of the rand against the dollar can be attributed to a confluence of international monetary policy shifts, domestic political optimism, and improved economic conditions.

South Africa has a current account deficit, and it grows each time the country continues to spend more on imports than they receive from exports. This leaves the country with foreign capital debt, which in turn results in the rand depreciating.

1) Overall profitability A weaker rand impacts negatively on general consumer and business confidence and consequently on expenditure. This has a negative impact on the lending growth and hence profitability of Standard Bank of South Africa Limited (“SBSA”).

How Does The Decline Of The Rand Affect You? The depreciation of the Rand against the US Dollar will have a substantial and meaningful impact on the daily lives of South Africans. As the Rand weakens, it has the potential to drive up inflation rates, resulting in higher prices for goods and services.

What is the forecast for the US Dollar in the rand? ›

USD to ZAR for the next 6 months

The USD to ZAR forecast for the next 6 months is that the USD to ZAR rate will decrease by -5.80% and hit R 17.28.

The highest South African rand to US dollars rate was on June 20, 2024 when 1 South African rand was worth 0.0558 US dollar.

US Dollar to South African Rand Exchange Rate is at a current level of 18.16, down from 18.18 the previous market day and down from 18.61 one year ago. This is a change of -0.15% from the previous market day and -2.41% from one year ago.

What is the safest currency in the world? The Swiss franc (CHF) is generally considered to be the safest currency in the world and many investors consider it to be a safe-haven asset. This is due to the neutrality of the Swiss nation, along with its strong monetary policies and low debt levels.

The Iranian Rial is considered the world's lowest currency due to factors such as economic sanctions limiting Iran's petroleum exports, which has resulted in political instability and depreciation of the currency. 2. Which currency holds the title of the highest valuation globally?

The rand is undervalued – this is where it should be, and why it's nowhere close. The rand continues to struggle through volatile global markets – sitting far from its 'fair' purchasing price parity (PPP) value of around R15. 00 to the dollar.

Our current policy has placed us in a lose-lose position for decades. We lose in real and financial terms ... net paying the foreign sector (a current account deficit) to net import our goods and services (a trade and services surplus). That is why the rand has been weakening.

The rand took a big knock in 2023, and economists agree that it will probably remain under pressure in the first months of 2024. But once the elections are out of the way, and US rates head lower, the local currency may start to strengthen. Some economists expect the rand will end 2024 stronger than it is currently.

Investec's base case scenario forecast puts the rand at R18. 20/USD for the second quarter of this year, with the rand expected to average R18. 17/USD in 2024. This scenario assumes that South Africa's economic growth is modest but lifts towards 2.0% over five years on sufficient domestic policy support measures.