SA’s shock second consecutive negative quarter GDP print today puts her in a "technical" recession and the Rand reacted by falling to R15.33.
Have a look at the long-term trend of the Rand/$ since 1985 below:
The average rolling 52-week depreciation against the Dollar is 7.1%, whilst the average "blowout", when we rise from below zero depreciation to a peak is around 38%, exactly 2 standard deviations away from this average.
We are currently sitting on an 18.7% 52-week depreciation. If this is a temporary setback we are experiencing, then we are likely to top-out at +1 standard deviation or 22% total annual depreciation which will take us to R15.60
If, however, this is more structural and persistent in nature (it most likely is), then we would expect to reach a blowout level of 38% annual depreciation, or R17.66
If this leads further to a Rand crisis of 70% depreciation as witnessed in 1985, 2001 and 2008, then we would see the local currency north of R20/$.
If you would like to see options available to you to protect ("hedge") yourself from the Rand decline, see the following two recent articles:
Offshore Investing: Now Is The Time
JSE Offshore Exposure Revealed
To cater for the huge interest in Rand hedges by clients trying to protect against the Rand depreciation, we now show the offshore earnings component of around 160 shares on the JSE in the QuickShare pages. Click here for the generic Quickshare link.
If you would like to reserve a seat for our highly popular "Offshore Investing for South Africans" seminar, please contact email@example.com or 021 700 4820.
Dwaine van Vuuren
RecessionAlert, Sharenet Analytics
Dwaine van Vuuren is a full-time trader, global investor and stock-market researcher. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT.com (US based) and PowerStocks Research (now Sharenet Analytics) into companies used by hundreds of hedge funds, brokerage firms, financial advisers and private investors around the world. An enthusiastic educator, he will have you trading and investing with confidence & discipline.