FX Moves: South Africa Strike Hits Rand

By
Olly Ludwig
August 20, 2012
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The strike and violence at South Africa’s Lonmin platinum mine pushed the rand down last week.

 

The death of an estimated 34 mine workers at a Lonmin mine in South Africa was enough to unleash an exodus from the South African rand last week, IndexUniverse ETF Analyst Ugo Egbunike said. In a brief interview with IndexUniverse.com Managing Editor Olly Ludwig, Egbunike said that while our currency report showed slight changes to many currency crosses in the last week, upcoming meetings among eurozone policymakers this week to discuss the continent’s debt crisis are likely to bring bigger changes this week.

MSCI Country
Indices
Local
Currency
1 Week 3 Months 12 Months
USD Local FX
Impact
USD Local FX
Impact
USD Local FX
Impact
Egypt EGP 4.24% 4.12% 0.12% 6.89% 7.34% -0.45% 12.21% 14.00% -1.78%
Israel ILS -0.63% 0.49% -1.12% -2.97% 2.33% -5.30% -10.71% 2.35% -13.06%
Morocco MAD -1.45% -1.35% -0.10% -1.14% 1.53% -2.67% -24.11% -13.48% -10.62%
South Africa ZAR -3.51% -0.41% -3.10% 6.42% 6.26% 0.15% 4.13% 22.68% -18.55%

 

Ludwig: What was the biggest currency story of the past week?

Egbunike: The biggest notable move was in South Africa last week, with a negative impact of about 3.5 percentage points for U.S. investors in South Africa, whereas local investors saw returns drop about 40 basis points. The reason behind the rand dropping relates to the issues of the Lonmin mine. Mine workers were essentially killed by the local police. There was a flight from the rand, due to the political backlash from that. South Africa is one of the only democratic nations with a militarized police force. They overreacted and people died needlessly.

Ludwig: What was going on with Australia? I see negative 131 basis points of FX impact for U.S. investors.

Egbunike: The decline of the Australian dollar was a reaction after the nation’s Treasury and the central bank indicated that they would be able to ease monetary policy if currency gains began to hurt Australia’s economy as far as exports are concerned.

Ludwig: Looking at the currency returns, most of the movement looks slight, almost like the summer doldrums.

Egbunike: Yes, a lot of the moves are pretty slight. A lot of it is waiting to see how the talks this week come out with the ECB. There is some uncertainty, but people are more on the optimistic end that there will be greater resolution and progress going forward as policymakers decide how to deal with the debt crisis. So this week will be pretty big; we may see some pretty large currency moves.

Ludwig: So a week from now, we’ll be having a very different conversation?

Egbunike: More than likely.

 

ETF DAILY DATA

The S&P 500 funds 'SPY' and 'IVV' led inflows on Thursday, Feb. 26, as total U.S.-listed ETF assets dipped to $2.094 trillion

'SPY,' 'MDY, 'XLF' and 'XLY' paced SSgA's issuer-leading inflows on Thursday, Feb. 26, as total U.S.-listed ETF assets fell to $2.094 trillion.

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