In line with the overshooting diagnosis, the countries which experienced the largest depreciations during the sell-off phase enjoyed the biggest rebounds. South Africa joined this rally: the rand strengthened through June and July, reaching a recent high of R13,23 in early August. The South African currency benefitted from commodity movements, including from a higher gold price following the Brexit.
We also saw the effects of a renewed search for yield by investors looking for something better than negative interest rates on advanced economy government bonds. In addition, domestic factors were supportive of the rand. The major ratings agencies reaffirmed South Africa’s sovereign investment grade credit rating in June. The local elections in August demonstrated the vitality and competence of our democratic institutions.