The rand has left many market participants scratching their heads over the past year: as local politics and economics deteriorate, the currency has continued to strengthen. In the second quarter of 2017 it was particularly strong, despite SA being downgraded by all three major ratings agencies during that time.

The reality is that movements in the rand have been influenced far more by global yield differentials than local politics. Political noise has provided only for short-term counter-trend movements in a generally strengthening rand environment. Whenever the flow of effluent from political leaders’ mouths abates, the rand has tended to move stronger, illustrating that something much bigger than political noise has been the major driver behind the rand’s strength.

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