The story is repeated. In 2008, thanks to the mitigation of the Fed Monetary Policy, South African Rand Rand against the US dollar by 33%. During the current crisis, Rand has already scored 23% of the world's 2020 minima, and this trend is not over yet.
For four years of the financial crisis, the Balance of the Fed, thanks to the buying of mortgage and treasury bonds, increased three times to $ 2.4 trillion by the end of 2010, and the federal fund rate collapsed from 5.25% to 0.25%. It caused an increase in the US dollar money supply and its decline against African Rand by 33%.
Now the key regulator also acts in the same way: last year, the Balance of the Fed grew almost twice a $ 7.4 trillion, the key rate was reduced to 0%, and the dollar's money supply (M2 aggregate) increased by a quarter.
At the same time, the decline in global economic activity was beneficial on inflation in South Africa - it came to normal.
At the same time, the interest rate in the country remains at quite high levels (3.5%), which makes the purchase of ZAR against USD favorable to obtain an additional profit from swaps.
However, the decline in the real value of the US dollar does not save the African region from internal problems. Africa remains an export-oriented country with low developed infrastructure. According to the IMF, the intra-regional trade volume is only 12% of the total African imports, and trade duties inside the continent often make trade with Europe and the United States more profitable than with neighbors. To smooth this problem, in 2018, 24 African countries entered into an AFCFTA free trade agreement.
The low development of the infrastructure and culture of production leads to the fact that the continent imports raw materials in the raw formation, degrading itself. For example, Côte d'Ivoire and Ghana grow 70% of the world volume of cocoa beans, but Africa practically does not produce chocolate.
Internal problems interfere with the creation of a positive investment climate, so it is not about the long-term purchases of African Randa. However, as long as the Fed and the US government continue to active incentives, the USD / ZAR pair will be reduced. Now the Senate discusses a new antique plan with a total of $ 1.9 trillion, proposed by the Baiden team. His adoption will lead to a new turn of the US dollar devaluation and strengthening African currency.
Analytical group Forex Club - Partner of Alfa Forex in Russia
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