it's not abouut the rand

[SimonPB]

http://www.fm.co.za/10/0129/cover/coverstory.htm

[topgun]

The paradox of course is that the "benign neglect" of the currency is actually sustaining and feeding the current account deficit, thereby deepening the country's socio-economic problems. So, inertia wins the day...while the domestic manufacturing base contracts further and unemployment grows. A sure recipe for stability.

[SimonPB]

well aha .. point is that there is more then one view and important to see the alternative view coming out .. alternative being that a strong rand is not all bad ..

[topgun]

It is not about a strong Rand...it is about a competitive currency that reflects domestic realities and not exogenous financial factors, one that sustains the economic development of a country based on production and exports a la China and other Asian tigers and not one feeding a dependency on domestic consumption and debt, ie. America. Unfortunately the powers that be wouldn't know the difference and evidently prefer bling projects such as the SWC and extravagant airports as the panacea for growth and employment creation. Point is that monetary/exchange rate policy needs a serious rethink, but that won't happen.

[SimonPB]

point is .. we disagree .. it's that simple ..

[bangbul]

weaker rand=higher inflation=higher repo etc. Bottom line; mess with market forces & you end up with a mess.

[topgun]

True that, China pegs their currency and look at the mess...10% GDP growth?

[SimonPB]

an the success of china is all due to their pegged currency ??

[DEP]

We agree with Topgun's view. We need a competitive currency! Strong Rand cause more harm than good. Sorry Simon, I think you are off the mark on this one.

[bangbul]

Topgun there's no way China & SA relate economicaly. China has huge economy be opened up after comunism with gov throwing lots of money into it. If i'm not mistaken China is considering unpegging of it's currency.

[SimonPB]

don'tt think they are considering .. more being pressured by the US .. but mostly saying sod off as Chhina pretty much owns the US considering how much US T bills they have.

[#12]

More like a tiltle of entitlement attitude in SA. Every corner you turn its first whats in it for me then how can you help my cousin/s and then what do you need to get the job done and how does goverment benefit so I can cash in there too? SA needs to develop a competitave advantage to Africa exports firstly then look at going Global. Stronger rand into Africa makes us extremely competative with slightly less rewards to start with. Rewards like investing take time and develop like a snowball. They gain momentum with every passing timeframe until crtitcal mass is overcome and free money can be generated at will.... for the benefit of all and not the few as is the case now.

[topgun]

The gist of what I am suggesting is that monetary policymakers should have some idea of an ideal target band in which the currency should trade as opposed to the current one-dimensional fixation with CPIX and benign neglect of the forex market. The SARB however should only intervene opportunistically when the Rand gets too strong and trades below the band and not try to defend it against weakness as the latter tends to self-correct. I am certainly not advocating a weak Rand policy to compensate for structural deficiencies but if electricity tariffs double and triple, surely the exchange rate must adjust for this fact to prevent lasting damage to the export sector. Besides, how can any responsible policymaker allow the value of the currency to be set by fx traders in NY and London based on the carry trade and speculative hot money flows? Ultimately, the proof is in the pudding. SA is losing global market share in both mining and manufacturing and suffers from perennial trade deficits - even Zakumi is manufactured in China.

[richardw]

One issue is the ability to target a band. China can do it - we'd have a much harder time. Many countries who have tried have failed and ended up losing a lot of their reserves.

If it were possible, I'd try to target stability rather than a level. E.g. to slow down the moves.

Also, it looks like the US is going to try force China to reduce the peg impact. It's directly helping China and directly hurting America. I think the Chinese are only holding the treasuries because they needed some way of getting dollars - i.e. it's how they get their peg. So dumping it would ramp their currency and hurt them as much as America.

[warhippo]

Strong rand, weak rand! - it will always suit somebody. However, as long as the overseas demand is for rand and not for "land" (hereby meaning: infrastructure, factories job creation etc) the strong rand would never be for real!! and monetary policymakers have no control as demand for rands can change in seconds and the strong rand can evaporate by switching to another currency by speculators using their laptops!! in a cafe somewhere across the ocean.

[striker]

Agree with Warhippo - foreign inflows are mostly speculators,not long term investors.When sentiment shifts,the Rands honeymoon will end abruptly,and that will likely happen 2nd half of this year.