The Johannesburg Stock Exchange (JSE) has just launched the Rand Index (Rain), a currency index that can be used by the asset management industry, economists, importers and exporters to track and forecast rand strength against other currencies.
The strong rand’s been under the spotlight in recent weeks and the Rain — which tracks the movement of the rand against the currencies of South Africa’s top five major international trading partners (the euro, US dollar, Chinese yuan, UK pound and Japanese yen) — provides a much-needed benchmarking tool.
The representative weight of each currency in the index will be calculated using audited import and export data of physical goods obtained from the South African Revenue Service — data which is currently only available two months in arrears.
The index will help those who want to measure how competitive South African goods really are in import and export markets.
The Rain will gauge rand volatility as against trading partners’ currencies, so one can assess whether or not the rand is overvalued.
The JSE will list tradable products based on the Rain once market appetite and demand is present — probably once investors are familiar with the product.
Calculated daily by the JSE at 3pm and 5pm, the Rain will be distributed daily. A review of the inclusion of each of the five currencies and changes in individual currency weightings will take place annually at index review. The JSE will then communicate any changes to currencies that make up the index or their weighting to the market.
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