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Unstainable Rand strength...

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Not applicable
Ja, but Simon, there does have to get to a point, way before the 1% scenario, where the risk associated with rand depreciation has to outway the gain in interest rates in SA. So the trick is to reduce interest rates until the point where that risk adjustment kicks in, and the rand levels off. Right now, it seems like a safe bet. Take your dollar demoninated loan (at 0.25%) pump it into a retail bond. You interest rate differential is around 7%. So you score the interest rate as well as a pretty decent chance that the rand will hit 6 to the dollar. At current levels, it can depreciate to 7.1 and you would still be in the money. However, at 6.5 to the dollar, a 7% depreciation puts you well within the rand's trading range, which then makes your carry trade more of a currency play, and there are far better currencies in the world for trading purposes. An interest rate drop should reduce the rand's slide temporarily, IMO, but once a new trading range is established, risk adjusted return calculations will be modified and we will continue down, but the range will tighten
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Not applicable
Ok so the rand is going to weaken only when the outsiders start withdrawing their money from our bonds>?
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prancing_horse
Super Contributor
We all have our views on the rand, my personal view is that at the moment the rand is the most overvalued currency in the world. I'd be very surprised if we don't see it fall by 10 to 15% against, the major currencies. We all wait for it to hit 10:1 before we scamble to buy dollars. I believe 2011 is going to be rand hedge year, and will make my purchases of sasol at 280, bil 205, imp 182, and bti 242, look like I should be jailed for theft.
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Quakedog
Super Contributor
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Not applicable
seem to remember that sentiment in 2003, and again in '04, then again in 2005, low and behold, bear punters were crying in 2006 - still wiping their tears in 2007, and then it took a catastrophe to bring brief respite to the rand bears - only to see the trend back in force again.
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SimonPB
Valued Contributor
yip .. an the theory is that this year they'll start buying equities to add to the billions of bonds they have bought ..
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Fredsed
Super Contributor
Rand major crosses are reflecting inflation realities and fears of the majors. Politically driven liquidity is inflationary by definition according to the non-sustainability (no free lunch) rule. The crosses of all minor currencies not engaged in money-for-nothing, ex-Zim style economics are enjoying the same ride. The additional factor for SA is the PGM situation and other such cherries. With the dollar cross piercing R6.75, tis R6.50, then if not R6.43 tis R6.00 and start new count.
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Not applicable
yes, but how do we moniter the inflows and outflow of the money? the stats is not in the news.
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Not applicable
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DEP
Super Contributor
I can't get enough of due listed stocks ... R/Pound approaching R10.15! Guy are pushing R/$ (R6.60) up on thin trade. 10% appreciation on R/ Pound December alone!
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SimonPB
Valued Contributor
what's the correlation between dual listed and the currency ??
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SimonPB
Valued Contributor
and for those calling the rand to some leve or other would be reminded to read this
The Frailties of Forecasts by Franco Busetti
http://www.tickertalk.co.za/blog.php?user=francob&blogentry_id=2480
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Not applicable
I recently traded my first currency futures. I'm using the online trading platform but have no idea where or how to close the trade.
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DEP
Super Contributor
same... i'm buying LSE stock ie effectively buyings pounds
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Russ
Super Contributor
That could be dangerous!
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