During the first 10 months of this year it has depreciated by 9 per cent. The rand’s overall recovery since the lows of late 2001 can be mainly attributed to improved perceptions about South Africa’s economic fundamentals, US dollar weakness, rising commodity prices, positive interest rate differentials, and, of course, a recovery from heavily oversold levels.
The emerging view of the rand is that it will respond to changing fundamentals in an orderly manner. Rising income levels, improved confidence and lower interest rates have bolstered credit extension, resulting in banks’ loans and advances to the domestic private sector increasing by 21,5 per cent over the twelve months to September 2005.