Sep 29, 2010
Weakening the rand could scare investors – JSEBack
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This comes on the back of South Africa's ruling party policy review in Durban, where the African National Congress president and South African President Jacob Zuma said that measures to control inflation and improve efficiencies, through a more competitive and stable rand exchange rate, would be considered as some of the party's economic reforms to speed up job creation.
The rand has gained almost 27% since the start of 2009, and hit a two-and-a-half year high of R6,96 to the dollar late on Tuesday.
Parsons said in an interview that political intervention in normal market forces would certainly have a negative impact on investor sentiment. "It is not a natural phenomenon to interfere with currency prices. South Africa has not been an economy that has demonstrated such interference and on the back of that, a free market approach has always formed part of the JSE's economic principles."
Meanwhile, gold hit a lifetime high on Wednesday, its tenth record in 12 sessions, as the dollar dropped against a basket of currencies, including the rand.
The yellow metal has consistently been trading above $1 300/oz since last week Friday, but the strong rand has not been doing much for gold bulls invested in gold shares, exchange traded funds and Krugerrands, all of which are valued in rand. In fact, it would appear that they are worse off now, than they were in February when the rand/gold price pushed through R10 000/oz.
Nevertheless, Parsons said that gold has generally been a stable market and had delivered some good returns.
Parsons said that investors could capitalise on both weaker and stronger gold prices and currencies by making use of the products available on the exchange.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Researcher and Deputy Editor Online
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