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Why the rand begins to wear his panties outside his trousers



Bruce Whitfield
  • Despite our changing policy, Rand saw a strong rally.
  • It is now at its best for more than ninety months.
  • And the comparison of prices for burgers in New York and South Africa shows that it should be further strengthened.
  • Unfortunately, this indicator does not mean much.
  • For additional stories, contact Business Insider SA.

RAND has put its powerful efforts against the United States
The dollar for the past months, breaking the level of R14 / $ this week – more
because the dollar is weak, than the strong rand. One way or another, your global one
the purchasing power has improved significantly and if The EconomisBig Mac Index –
any indicator, the rand may be ready for even greater profits – but only if
Violating domestic political issues of CA lose their prominence.

Burgernomics, the price paid for Big Mac in the US against
other countries of the world, everything began as a joke. But this
taken on your own life, as it demonstrates, that you can get for a price
American Big Mac in other parts of the world. This is an example of a purchase
power parity, where the US dollar is used as the base currency and compares a
US goods to those around the world. Running Mack is very much

Read: Here's an investment idea that can make you money – and help fix South Africa

According to Economist: "Great Mac costs R31 in the south
Africa and $ 5.74 US in the US Expected exchange rate R5.40.
The difference between the actual exchange rate of 14.18 (at the time of writing)
suggests that the South African rand is undervalued by 61.9%. "

The reality is that there are many factors
to help increase the cost of Big Mac in the United States against South Africa, p
everything from the value of property and labor that needs to be considered. None
Therefore, it costs the same for Big Mac production in the United States against South Africa, but
The parity of purchasing power is an interesting mechanism that can be used when considering
relative values ​​and there are few products as universal, as ubiquitous
Running mac

Why did the rand refuse?

With one or two minor exceptions, including EFF
amateur theatricality in the parliament, the strategy of which the party is increasingly succeeding
when he can not get the law or logic on his side – there was more than that
The usual dose of good news recently associated with South Africa.

The market responded positively to public reports
Investment corporation wants to transfer 6.4 billion dollars.
plus have the right to vote on who manages this utility. What the President saw
suitable for speeding up the announcement that he again appointed Lesette Kganago
Another term as the Governor of the Reserve Bank is also considered as positive.

But the biggest factor is the US decision that is the next step
his bets will be reduced. The chairman of the US Federal Reserve Jerome Powell spoke in chief
Decrease in rates was on the cards already at the end of this month.

With the increase of the rand and local inflation also so far
Under control, a slight drop in the rate, perhaps the first of a few this year, should be included

Of course, there is a risk of lowering ratings
Moody's, which may lead to further deployment of the currency. And ours
the policy remains as toxic as ever, since the EFF is looking for new goals and resorts
to almost physical violence in the parliament, because he seems unable to hide false ones
accusations at senior ANC positions. This means that the environment is unlikely
contributes to a stable outlook and thus undermines growth efforts.

Nevertheless, the Big Mac index keeps the rand by almost 62%
undervalued. This is the third most underrated currency with over 50
in the experiment.

But even the magazine warns of bureuronomics never
It is believed that it should be taken seriously
The theory is more assimilated.

Bruce Whitfield is a multiplatform financial journalist and TV presenter.

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