THE rand is now the world’s 18th most traded currency, down from 10th place in 1998.
Figures released by the Bank for International Settlements (BIS) at the weekend show the rand’s present ranking is an improvement from 2010, when it was ranked 20th. It now accounts for 1.1% of world trade.
The BIS survey — which reflects turnover in foreign-exchange spot markets, as well as in foreign exchange and interest rate over-the-counter derivatives markets — is done every three years. In 2007, the rand was ranked 15th.
Stanlib chief economist Kevin Lings said the latest ranking did not mean the trade in rand had dwindled. "In fact, the growth in the value of the rand traded globally has been impressive, rising 108% in the past three years."
However, the trade in a number of other currencies from emerging markets, especially China, Russia, Mexico and Turkey, has grown at a faster pace.
The Brazilian real is the 19th most actively traded currency, with the Indian rupee in 20th position.
Mr Lings noted the latest figures were a good indication of why South Africa’s Reserve Bank would not be able to support the currency, if it should decide on such action in consort with other emerging markets.
Foreign exchange traded from Johannesburg accounts for only 0.3% ($27bn) of the world’s daily foreign-exchange market turnover, yet the rand accounts for 1.1% ($60bn) of the world’s daily currency trading.
That means 55% of all daily trade in rand takes place outside South Africa — mostly in the UK — between non-residents of the country.
"It highlights the difficulties the Reserve Bank faces in trying to significantly and consistently influence the value of the rand," Mr Lings said.
The rand has strongly recovered from its yearly low of R10.51/$ reached last month, and on Monday morning traded at about R10/$. In the late afternoon it showed more strength and traded at roughly R9.98/$. It traded 1.7% stronger against the British pound, at R15.64/$.
Analysts said the market was apprehensive and awaiting the Bank’s quarterly bulletin on Tuesday. South Africa’s deficit on its current account is the most important indicator on the watch list. The Bloomberg consensus view among economists is that the deficit deteriorated to 6.2% of gross domestic product in the second quarter from 5.8% in the first.
Countries with huge current account deficits — notably Turkey and India — have been prime targets for depreciating currencies over the past month. The rand has done relatively better, but analysts warned that a sharply lower current account deficit number could see the rand fall measurably.
However, there is even a chance that the deficit could improve to 5.7% of GDP, as predicted by Investec economists. Should that occur, the rand could strengthen.
Rand Merchant Bank (RMB) currency analyst John Cairns said Friday’s weak US nonfarm payrolls data brought much-needed relief to risky assets that had been under constant pressure from a string of much better than expected data.
A slightly worse than expected 169,000 jobs were created in the US in August, and the previous month’s figures were also revised downwards. While the unemployment rate fell from 7.4% to 7.3%, the figures were weak enough not to "seal the deal" on tapering of quantitative easing by the US Federal Reserve, Mr Cairns said.
"An easing of emerging-market pressures, the weak payrolls number and the ending of most of the local mining strikes has brought some much-needed relief to the rand," he said.
Not much materialised from the Group of 20 summit in St Petersburg, Russia, with Brics countries (Brazil, Russia, India, China and South Africa) unable to finalise any co-operation to support their currencies, which remain vulnerable.
Growth in the role of emerging-market currencies has been impressive, however, as illustrated by the BIS survey. In particular, the Mexican peso is now the eighth most traded currency in the world (2.5% of world trade, or $135bn a day), up from 14th in 2010, while the Chinese renminbi entered the list of the top 10 most traded currencies for the first time, with 2.2% of world trade placing it in ninth position, mostly driven by a significant expansion of offshore renminbi trading.