A BRIEF HISTORY OF THE
RAND-DOLLAR EXCHANGE RATE
The rand was introduced in 1961 to replace the non-decimal South African pound. Throughout the 1960s and 1970s, the rand was pegged
against either the dollar, the pound or a basket of currencies. Since the early 1980’s the rand exchange rate has been set by the market, but
with exchange controls limiting the extent of trade. The general trend over the past three decades has been to weaken, but the rand has also
strengthened significantly after major blowouts in 1985, 1998, 2002 and 2008.
Global Financial Crisis of 2008.
Rand collapses along with just
about every currency except the
dollar, euro and yen. Commodity
prices also collapse.
2001: Rand falls to record low of
R13.71/$ due to dot-com crash.
Zimbabwe land invasions and
9/11 attacks add to the negative
sentiment.
14
12
Emerging marker JITTERS
of 2013: talk of the end of easy
money in the US causes hot money
to leave the emerging markets
Labour unrest in SA.
1998 East Asia Crisis: Rand falls
from R5.10/$ to R5.80/$. SARB
reacts by hiking the prime rate to
25% and spends billions trying to
defend the rand to
10
1997: Exchange controls relaxed
for individuals.
8
1985: US banks suspend loans to
SA, leading to debt standstill , a
currency collapse and reintroduction
of the financial rand amid tight forex
controls. Rubicon speech causes
rand to fall further.
6
4
2
Another GREAT RECOVERY: Interest rates
are slashed globally and major central
banks embark on extraordinary monetary
stimulus, resulting in ‘search for yield‘ and
strengthening emerging market currencies.
1996: Market jitters over the first
current account deficit in a decade.
The great comeback. Low interest
rates in the West and rising
commodity prices (thanks to Chinese
industrialisation) support the rand.
0
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
WEALTH OF INSIGHT
OLD MUTUAL WEALTH INTELLIGENCE
7 Worst Months for the rand vs. the dollar since 1980
Aug 85
-20.52%
Oct 08
-18.55%
Dec 01
-16.78%
Jan 85
-15.09%
Jun 98
-14.81%
Jul 84
-13.46%
May-13
-12.25%
A Very Volatile Character
Daily
Weekly
Average Change
-0.03%
-0.12%
Best Gain
9.82%
12.63%
-17.25%
-12.77%
Worst Loss
The rand has on average lost 0.03% per
day, 0.12% per week and 0.52% per month
against the US dollar.
The worst daily change was on the
15 October 2008, when the rand lost 17.25%
The best daily gain was 9.82% on
12 December 2001.
What is an Exchange Rate?
An exchange rate is the price of one currency relative to another.
can be bought at spot rates (for immediate delivery) or forward (for
There is a rand exchange rate against every other currency on earth,
delivery at a future date). According to the Bank for International
but the ones most people care about are rand/US dollar, rand/
Settlements (BIS), daily global forex market turnover is $5 trillion.
British pound, rand/euro. Convention dictates that the exchange
Exporters, importers, tourists and investors all buy and sell currency
rates are expressed as the rand value of a foreign currency, for
to do business across borders. Daily turnover in the rand/ US
example “rands per dollar”. When the exchange rate is higher,
dollar market is estimated at more than $24 billion. Though this is
the rand is weaker (if the exchange rate moves from R7.50/$ to
tiny compared to the more than $1.2 trillion daily turnover in the
R9.50/$ means you need more rands to buy a dollar, hence the
rand has lost value.
euro/US dollar market, the rand still punches above its weight due
to South Africa relatively sophisticated financial markets. The BIS
ranks it the 18th most heavily traded currency, even though South
The market for foreign exchange (forex) is much larger than other
Africa’s only has the 28th largest economy in the world, according
financial markets, such as bond and equity markets. Currencies
to the World Bank.
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