Stability, bond notes kill rand interest

THE recent stability of the South African rand against the United States dollar and the increase of bond notes in the economy have led to a decline in cross-border traders seeking the rand for their business.

Source: Stability, bond notes kill rand interest – NewsDay Zimbabwe January 5, 2017

BY TATIRA ZWINOIRA

This comes as traders were benefitting from the dollar gaining strength against the rand when the United States Federal Reserve increased its interest rates by 0,25 basis points to a range of between 0,5% and 0,75%.

Across Southern Africa, the rate hike led to regional currencies taking a knock, particularly the rand, since the region is a commodity-based market.

In the past week, the rand has been stabilising, ranging between R13,57 and R13,84 against the dollar, though it is still trading at $1:R14 locally.

On the issuance of bond notes, some banks are only giving out the surrogate currency due to low levels of the United States dollar in the market.

Two weeks ago, the Reserve Bank of Zimbabwe doubled the withdrawal limit of bond notes to $100 per day, while banks kept that of the US dollar at an average maximum of $50.

This led to more bond notes, which have proven difficult to exchange with cash dealers, being issued into the market.

The benefit of a strengthening dollar mean cross-border traders are able to get more of the rand when using dollars and, thus, purchase more goods.

Traders have also been cushioned by the stabilising of prices of goods in South Africa due to the country’s central bank’s monetary policies.

Analysts say when the rand is weaker, imports become cheaper, while exports become more expensive.

Zimbabwe Cross-Border Traders’ Association secretary-general, Augustine Tawanda told NewsDay that apart from the rate hike, the festive season usually sees an influx of the rand into the market from Zimbabweans living in the neighbouring country.

On average, cross-border traders need $300 a day to buy their wares from neighbouring countries, particularly South Africa.

COMMENTS

WORDPRESS: 2
  • comment-avatar
    Pps 7 months

    But Zanu and Scoones have told us that a Bond Dollar and a US Dollar are exactly the same. This means that Scoones and Zanu have permission to print US dollars – surely?
    I wonder if Donald Trump will ask Professor Scoones to give him a hand by printing some US dollars for the USA?
    This would be in line with the modern trend of “outsourcing.”
    As time moves on we could probably suggest and then implement “outsourcing” some governance for Zimbabwe. The last 37 years have been quite expensive for the people – they had all their savings stolen by Dr. Gideon Gonzo’s printing press. But this time the Bond notes will all be fine and dandy. The Bond notes shall create the wealthiest nation in the world thanks to the economic brilliance of Professor Scoones and the British Government.

  • comment-avatar
    Kevin 7 months

    When changing dollars in South Africa there is a price to pay and they cannot be used in any shop unless some foreign shop owners are acting illegally. If you change $300 at a bank you will pay a flat fee of R40 and the exchange rate will be several points less than the bid price for dollars. What this means is that for $300 you would get a rate of 13.87 against a bid price of 13.92 and still pay a R40 fee that is an effective rate of 13.74 they would be better advised to buy Rand in Zimbabwe at 14 as they wold be R78 better off. The writer is clearly not conversant with the vagaries of foreign currency in a stable economy.