In this broadcast, Andre Cilliers at TreasuryONE shares his insight into probable currency movements and jeopardizes his wonderful recent prophecies. The currency explains the reasons for the volatile rand, why the SA exchange rate fluctuates and the dangers to beware of. Cilliers also provides some understanding of the impact of three major international issues that are likely to have on the local currency.
Andre Cilliers on the performance of the stripe
If we look at the last week and a half, we encountered a little disaster in South Africa. We have a president who calls for a state of emergency. Fortunately, this does not come with closure and all, but this is a national state of disaster. More than one district is affected by this, as the port has a very negative impact; and it is our largest port in South Africa. It will affect the whole country; how products are delivered and when they are delivered. It could affect the price and so on. We have already seen the IMF lower economic growth forecasts as a result. So, it’s a little local stuff to come to the forefront. For a long time we have only talked about international content and there was very little on the ground that affected the rand. But KwaZulu-Natal affects it and it affects. I think there is some frustration on the horizon. Therefore, we are a little weaker at this stage.
Á disaster KwaZulu-Natal and Eskom to focus on the sensitive areas of the country
Once again we have seen Eskom come out of level two and all of a sudden it will be level 4. If you throw it back at the KwaZulu-Natal situation – where a lot of money and infrastructure is destroyed – Eskom has a lot of work to do to bring electricity back to many places. Then there are power plants that do not work. It highlights all these sensitive places of the country that we put on our backs, but they are there and it takes a little ignition for the fire to explode and have an immediate effect. So you have the rating agencies; The International Monetary Fund, you make everyone jump on the bandwagon and point out that this extra money that needs to be borrowed could affect public finances, growth, inflation, interest rates. Behind that you sit with exporters and importers who react suddenly and this reaction enters the market [results in] jump as we have received in this time. I was right to say that the stripe goes to 14.50 if it breaks the 14.80 level and could very quickly go back to 14.50. When it breaks one of these points, they again become upward resistance points. We saw the minute we broke at 14.80, it was very fast to go to 15.10 and when we broke at 15.10 this morning it started very fast to go back to 15.30. If we go three weeks back in time, four weeks of discussion, these are exactly the variables we had then [and they] still persistent now. And once you break through these technical issues, you’re taken to the next level of business.
On important agreements that international companies are committing to
At $ 1m, 14.50 and 15.50 make a huge difference on R1m. It is R1m that goes out of your pocket or into your pocket. As you mentioned, we are working on big numbers. Import and export trade in South Africa is strong. It is not uncommon for what people consider to be an export on the fruit side to have exposures well over $ 40m and $ 50m a year. Now you take a rand for 50 million dollars and then you say that it is a profit of 50 million ISK for them, whether they get or reveal. So, a huge number has a huge impact on the bottom line of a business.
On South Africa’s exchange rate fluctuations
That is because we are a much smaller economy and we are priced in rands and cities in euros and dollars. But looking at the euro, we have risen 109.36 this morning against the dollar which returned from 107.80 and 107.40 level just two days ago. This is a big move. It seems to be only 200 points, but there are 200 points at a very low number. So, in percentage terms, big moves. And yes, it will affect the results.
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Andre Cilliers makes sense to confuse Rand’s influence
Source link Andre Cilliers makes sense to confuse Rand’s influence