The trade-weighted rand on Thursday jumped 2,1% from Wednesday and moved to its best level since October 16 2000, when it was R62,72 and was 24,4% stronger than this year’s worst level of R50,11 reached on January 16.
Its level on Thursday at 10.30am was R62,35, beating last year’s best level of R61,86 reached on December 4 and well above the R59,85 level on December 11, when the South African Reserve Bank (SARB) last cut interest rates in response to the recovery in the rand from R46,16 on January 22 2003. On Wednesday it was R61,04.
The four most important currencies of the 13 units in the basket with their weights in brackets are the euro (36,38%), United States dollar (15,47%), British pound (15,37%) and Japanese yen (10,43%).
Prior to 2003, the government and the SARB viewed the rand’s exchange rate as a given to be determined by market forces.
This changed at the time of the February 26 2003 Budget when exporters started complaining about the strength of the rand, but the Minister of Finance, Trevor Manuel, said the rand was still undervalued.
Since then, SARB Governor Tito Mboweni has repeatedly affirmed that the rand remains undervalued.
The August 14 2003 monetary policy committee statement said: “The level of the real effective exchange rate of the rand was still below the index values in early 2000, leaving domestic producers in a more competitive situation in export markets than at the turn of the century.”
On December 20 2001 the rand reached a record worst level of R13,86 a dollar, R20,0866 per pound sterling and R12,4790 per euro and the trade-weighted rand was R36,09.
The rand finished 2002 at R8,59 per dollar, as the rand was the best-performing currency against the US dollar in 2002.
The rand averaged R7,55 per dollar in 2003 compared with R10,50 in 2002. The rand was more volatile in 2003 against both the US dollar and euro than in 2002, but only half as volatile as in 2001.
This volatility is measured as the range between best and worst level for the year divided by the average for the year.
In 2003 the rand’s volatility against the US dollar was 39,6% compared with 39,1% in 2002 and 74,4% in 2001. In 1998 it was 35,5%, while in 1999 it was 10,6%. In 1995 it was only 5%. — I-Net Bridge