Forex Walkthrough


Level 5 Economics - South African Rand

South African Rand (ZAR)
Central Bank: South African Reserve Bank (SARB)
Current Interest Rate:

Emerging Opportunity
Having been previously modeled on the Bank of England, the South African Reserve Bank stands as the monetary authority in South Africa. Taking on major responsibilities similar to those of the other major central banks, the SARB is also known as a creditor in certain situations, a clearing bank and a major custodian of gold. Above all else, the central bank is in charge of "the achievement and maintenance of price stability". These responsibilities also include intervention in the foreign exchange markets when the situation arises.

Although it may seem counter-intuitive, the South African Reserve Bank remains a wholly owned private entity with hundreds of shareholders that are limited to owning less than 1% of the total number of outstanding shares. Such regulations are to ensure that the interests of the economy precede those of any private individual. To enforce the bank's policies, the governor and a14-member board head the bank's activities and work toward monetary goals. The board meets six times a year.

Viewed among traders as relatively volatile, the average daily range of the South African rand (ZAR) can be as high as 1,000 pips. However, when translated into dollar pips, the movements are almost equivalent to an average day in the British pound, making the currency a great pair to trade against the U.S. dollar (especially when taking into consideration the carry potential). Traders also trade the rand for its close relationship to gold and platinum. South Africa is a world leader when it comes to exports of both metals, so the correlation is similar to that between the Canadian dollar and crude oil. As a result, forex traders should consider the commodities markets in creating positions when economic data is limited. (Read more about the rand in The New World Of Emerging Market Currencies.)

Experienced forex traders know that in order to be successful in forex you must first know the factors that move individual currencies. We've taken a look at the governing bodies and socio-economic factors that move the nine most widely traded currencies in forex and hopefully you've got a better feel for why these currencies behave the way they do. If you're still looking for more information, don't worry, we will be delving even further into a few of the major economic factors that affect currencies. (For more introductory reading on the forex market, check out Getting Started In Forex and Forex Basics: Setting Up An Account.)

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