World Cup 2010: Has football kicked off a rand rally?

ForexNewsNow | Published on July 7, 2010 at 7:05 pm

NEW YORK (Forex News Now) – The World Cup has done many things for South Africa: It has raised the country’s profile on the global stage, brought in thousands of tourists, and created an international market for the vuvuzela.

But what has the massive sporting event done for South Africa’s currency, the rand? As the annoying, monotonic buzz of the plastic horn has assaulted eardrums across the world, has the rand staged an attack of its own versus the U.S. dollar?

One would expect the large inflows of capital during the competition – an estimated ZAR 27 billion, according to South Africa’s tourist board – to have had some effect, certainly.

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And taking a narrow view, the rand has indeed strengthened against the dollar since the first match, in which South Africa played Mexico. USD/ZAR slid from 7.6813, the open of June 13, the first day of trade after the game, to 7.6202 during late U.S. trade on July 7 – a drop of 0.8%.

The currency pair’s decline is even more marked if one views the daily chart from say a month before the World Cup began, on May 19, when USD/ZAR hit a 7-month high of 8.0794.

However, we should not forget that South Africa is a resources-rich country, whose currency is strongly linked to demand for commodities. It is this that will have most likely been the deciding factor in the rand’s movement, more so than any number of vuvuzela sales, at least.

 

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