RAND (ZAR) Falls against the Euro and US$

Monday, 4 April 2011 06:40

Rand (ZAR) drops against the Euro and US$ on the back of expected ECB rate hikes later this week, even though commodities remain strong the Rand, like the AUS$, are two of the best "carry trades" in the majors.

Carry trade is where you borrow in a currency of a country with low internal interest rates and then invest those proceeds in a country that has higher internal rates.

South Africa is currently at 5.5% and similarly Australia is at 4.75%, if the ECB does in fact increase rates then the interest rate spread between the underlying currencies narrows and unwinding of previous positions could occur and bring considerable pressure in the currency.

Currently the RAND is 6.6932 against the US and 9.5302 against the Euro.