The rand has experienced a volatile 2016, battling the infamous “NeneGate” which took place over the 2015/16 holiday period.
But the unexpected firing of South Africa’s finance minister was just the start of all the hurdles that local markets have endured, including local political missteps, a global economic slowdown, a local drought, municipal elections, the Brexit and Trump’s US presidential win.
The rand opened the year at R15.56 to the dollar, a significantly weakened position compared to levels prior NeneGate – however, it would reach all-time lows in January, briefly touching R17.99 to the dollar before settling at around R16.88.
By Thursday, 29 December, 2016 rand traded at around R13.67 – a far way off early 2016 predictions that the year would close off 2016 at a level of R16.50 – R17.00 to the dollar.
This is largely thanks to South Africa avoiding a ratings downgrade to junk in 2016, as well as the surprises delivered by international politics. However between the rand’s recovery from the start of the year to it’s ‘strong’ close, it has endured a volatile ride.
While government officials insisted the rand’s ups and downs were not tracking political turmoil in the country, the evidence points to the contrary, with the rand dipping every time new threats of arrests were made against finance minister Pravin Gordhan – with a recovery seen every time he was deemed ‘safe’.
So too the trend was seen on each occasion where Jacob Zuma’s presidency was challenged, only in reverse (ie, the rand rose on every challenge and dipped every time he was deemed ‘safe’).
This political roller coaster was specifically mentioned by credit rating agencies during every rating review that took place in 2016, which also added to the rand’s volatility.
The local currency’s strongest point was reached in early November following Donald Trump’s US presidential election win. Initial unease weakened the dollar, but it recovered soon thereafter.
The reverse was seen after the surprising outcome to the ‘Brexit’ vote, which caused uncertainty in UK-linked markets (especially emerging markets, including South Africa), where the rand strengthened significantly against the pound, but weakened against the dollar.
The graph below shows the rand’s performance throughout the year:
5 year review
|1 January 2016||R15.56|
|29 December 2016||R13.67|