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The rand is los­ing its place in in­ter­na­tional for­eign ex­change trad­ing as lo­cal political events scare off in­vestors and as the prospect of higher US rates has lead money to move to the US dol­lar as well as other hard cur­ren­cies.

The lo­cal cur­rency this year dropped to 20th place on the list of the most traded cur­ren­cies world­wide, while it had been 18th up un­til 2013 and in 13th place in 2001.

This is the pic­ture that emerges from data from the Bank for In­ter­na­tional Set­tle­ments (BIS).

Jana van Deven­ter, head of fi­nan­cial mar­kets at ETM An­a­lyt­ics, said that lo­cal political de­vel­op­ments had dented sen­ti­ment to­wards the rand and there had been a shift from emerg­ing cur­ren­cies to hard cur­ren­cies like the US dol­lar, the yen and the euro.

Van Deven­ter said al­though the pro­por­tion of rands in global for­eign ex­change turnover had shrunk from 1.1% in 2013 to its cur­rent level of 1%, it is still among the top 20 cur­ren­cies be­ing traded world­wide. The rand’s turnover also ex­ceeds those of a few of its emerg­ing mar­ket con­tem­po­raries.

Ac­cord­ing to Van Deven­ter, the vol­ume of trade in a for­eign cur­rency is seen as a mea­sure of sen­ti­ment to­wards that cur­rency. It gives a good in­di­ca­tion of liq­uid­ity and in­vestors gen­er­ally feel more com­fort­able with ex­po­sure to a highly liq­uid as­set.

Eike Feltz, CEO of Cur­rency Partners, said the liq­uid­ity of a cur­rency was an im­por­tant fac­tor for in­vestors who wanted to en­sure that they could eas­ily take an in­vest­ment po­si­tion or with­draw from it.

ETM said it was not too con­cerned about the de­cline in the pro­por­tion of rand in global for­eign ex­change turnover, be­cause the lev­els tended to fluc­tu­ate in cy­cles.

“If we in­creas­ingly see a de­crease in rand turnover, it could make red lights flash in re­la­tion to the cur­rency’s liq­uid­ity, which can in turn be neg­a­tive for in­vestor sen­ti­ment.”

But Van Deven­ter said the rand’s 1% had to be seen in con­text.

Ac­cord­ing to BIS, the most traded cur­ren­cies are the dol­lar (87.6%), euro (31.3%) yen (21.6%) and pound (12.8%), which con­sti­tute 153.3% of the to­tal 200% of global for­eign ex­change trade. (Be­cause two cur­ren­cies are in­volved in every trans­ac­tion, the sum of the per­cent­age share of in­di­vid­ual cur­ren­cies comes to 200% in­stead of 100%.)

Feltz said that the de­cline in the rand’s con­tri­bu­tion to the for­eign cur­rency mar­ket could be be­cause other cur­ren­cies’ con­tri­bu­tions grew faster. But the ab­so­lute av­er­age daily value of rand trad­ing still de­creased from $60 bil­lion (R820 bil­lion) to $51 bil­lion.

Van Deven­ter said some of the big­gest emerg­ing cur­ren­cies were only just do­ing bet­ter than the rand, in­clud­ing Rus­sia and In­dia (both on 1.1%), while the lira (1.4%) and the won (1.7%) had higher trad­ing vol­umes.

Feltz said the past year’s political and eco­nomic un­cer­tainty made South Africans ner­vous about the in­vest­ment of their cap­i­tal.

“Ig­nore the lo­cal and in­ter­na­tional drama. Look at the long-term ben­e­fits of the cur­rency mar­ket in­stead of chas­ing short-term prof­its,” he warned.

Feltz said the rand rode a see­saw this year. “Last De­cem­ber we saw how mar­kets can de­cline. Now, af­ter the US elec­tion, it’s hap­pen­ing again.

“Don’t let the short-term ad­van­tages of for­eign in­vest­ments mo­ti­vate you, be­cause the for­eign ex­change mar­ket is highly vari­able and un­pre­dictable. Rather look at the long-term ben­e­fits of for­eign in­vest­ments and stick to your in­vest­ment plan.”

Ig­nore the lo­cal and in­ter­na­tional drama. Look at the long-term ben­e­fits of the cur­rency mar­ket in­stead of chas­ing short­term prof­its

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