However, it can be argued that the economy may be well positioned to recover quickly in the short term, while the South African Rand (ZAR) could also provide opportunities for investors in the future. That’s why.
A look at South African currency: yesterday and today
Historically, the rand has served as an outlier in the global financial markets, while it h as been leaning as a viable buy in the so-called "Bank of America Merrill Lynch" as recently as In the fourth quarter of 2019.
It has performed particularly well during periods when investor risk appetite has waned, and this was certainly the case last year when geopolitical tensions between the United States. United States And China has peaked.
The reason is simple; since currency markets like ZAR tend to benefit directly from the equity inflows that occur in cases where stocks are the most likely asset class to thrive due to specific developments of the market.
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There are several factors behind this depression (apart from Covid-19); including rising public debt, a series of downgrades to the credit rating and the expulsion of a large bond index followed by billions of dollars in funds.
The good news here is that the ZAR has undoubtedly bottomed out and should not drop further anytime soon, while the fact that this bad news is already valued could leave the currency ready for a rebound. like South Africa and other similar emerging markets are entering a period of recovery.
Long-term prospects for the Rand
This relatively positive sentiment is indicative of the wider economic climate in South Africa, as new President Cyril Ramaphosa takes practical steps to reverse the impact of years of rude populism and economic incompetence.
However, this represents a long distance trip and one that has seen South Africa sink into two recessions since the new leader took office in February 2018.
However, the foundation is being laid for brighter and more sustainable prospects, and those that will boost South Africa's economic performance and attract significant investment from abroad. This is especially true in the event that South African stocks and currencies are undervalued, which is likely during periods of economic decline and austerity.
Of course, this will have a positive impact on the value and demand for ZAR, while South Africa's increasingly gradual approach to regulating cryptocurrency trading could also help the market in the future and create new opportunities for traders. in the future.