Carry Trade Makes South Africa’s Rand Stronger

The South African rand strengthened today against the US dollar on the speculation that the carry trade would persist, increasing the capital inflows in South Africa and bolstering the currency.

Pravin Gordhan, South Africa’s Minister of Finance, said that the decision of the US Federal Reserve to keep the interest rates near zero would support the rand. The so-called carry trade, when the speculators borrow in the developed countries with the low interest rates to invest in the higher-yielding assets, boosted the rand 38 percent since the beginning of the last year.

USD/ZAR dropped from 6.820 to 6.794 as of 15:09 GMT today after rising as high as 6.865.

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