Digging deeper into rand volatility

The South African rand has been a currency of interest for many, often referred to as a 'rattlesnake' due to its volatility. To gain a better grasp of what drives this volatility and the factors influencing the currency, CNBC Africa brought together trading experts in a recent interview. Mamokete Lijane, a Trading Strategist at Standard Bank, Matete Thulare, the RMB Head of FX Execution, and Andre Cilliers, a Currency Strategist at TreasuryONE, provided valuable insights into the complexities of the South African rand's movements. The discussion delved into the fundamental principles behind the currency, the impact of global and local factors, and the significant daily volumes traded in the market. Mamokete highlighted the importance of understanding the balance of payments and trade dynamics in influencing the rand. She emphasized that the currency's value is tied to the country's ability to attract foreign investment through trade surpluses or deficits. Andre echoed this sentiment, stressing the interconnectedness of the international economy and how events like geopolitical tensions and local issues such as load shedding can affect the currency's movement. He pointed out that recent developments in South Africa, including infrastructural challenges, have added to the volatility. Matete provided a technical perspective on currency trading, describing the continuous demand and supply dynamics that determine the rand's value on a daily basis. He also shed light on the massive volumes traded in the FX market globally, with the rand being a significant player in this space. The experts discussed the market's transparency and the impact of sentiment on currency pricing. They acknowledged the complex interplay of economic fundamentals, technical analysis, and investor confidence in determining the fair value of the rand. Looking ahead, the experts shared their views on the currency's future trajectory. Despite the challenges posed by domestic and global factors, they expressed optimism about potential improvements in South Africa's electricity supply and structural reforms. Mamokete and Andre suggested that stabilizing power supply could lead to a strengthening of the rand, with Andre even speculating a potential decrease in value to 18 against the US dollar. This positive sentiment was grounded in the belief that addressing key issues like load shedding could boost investor confidence and drive economic growth. Overall, the interview provided valuable insights into the intricate dynamics shaping the South African rand's volatility. By analyzing the interplay of global events, local challenges, and market fundamentals, the experts offered a comprehensive overview of what drives the currency and how it may evolve in the future.