Bond Notes Kill Rand Interest

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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.

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. – The Independent

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