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Outlook for Rand Uncertain

This week has seen the release of the United Nations Conference on Trade and Development (UNCTAD) World Investment Report.


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Outlook for Rand Uncertain

| News by Staff Reporter

Many factors at play causing volatility in the Rand.

This week has seen the release of the United Nations Conference on Trade and Development (UNCTAD) World Investment Report.

The report shows that, for the first time in history, Emerging Economies are receiving greater foreign direct investment (FDI) inflows than their First World counterparts. Total global FDI did, however, fall to $1.4 trillion* (-18% from 2011.)

South Africa was the third-largest recipient of incoming investment funds in Africa with a share of 9.1%, behind Nigeria and Mozambique, although South African FDI has declined by 24% since 2011, from $6 billion to $4.6 billion.

This decline has been attributed to a once-off divestment in the Palaborwa Mining Group by Anglo American and Rio Tinto.

South Africa's total FDI is estimated to be $139 billion, generating 35.6% of gross domestic product (GDP).

Outward FDI from Africa tripled to nearly $14 billion, mostly from South African and Angolan companies, with total South African FDI in Africa being $18 billion.

Meanwhile, the price of gold has been steadily declining, with spot gold quoted at $1,227.86 an ounce yesterday, leading some investors to speculate that the price may approach the marginal cost of production. Gold makes up a significant portion of South African exports. Silver, platinum and palladium were also lower.

Oil edged slightly higher as weaker than expected US financial data led speculators to assume that the Federal Reserve is not going to end it's aggressive bond-buying policy, also known as Quantitative Easing (QE), in the near future.

While austerity remains the dominant policy in the UK and Europe, exports to these countries from South Africa are not likely to grow in the short term.

Prices of stocks have also fallen on the JSE with South African Reserve Bank governor Gill Marcus describing the recent sell-off as yet another phase of the global financial crisis. She called for management and labour to exercise restraint in their wage demands, as commodity prices are low. Stocks recovered slightly yesterday.

The Rand, which has been slightly stronger this month after reaching a four-year low in June, is currently trading at about R10.05 to the US Dollar and will be affected by all the above factors. Currency traders also await the producer price inflation (PPI) results for May, as well as the Bureau for Economic Research inflation expectation survey.

* All figures in this article quoted in US dollars

Source: www.bizpremises.co.za

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