Political uncertainty

What makes the rand so volatile: global or home-made factors?

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Nasha Mavee, Axel Schimmelpfennig on 30 March 2017

Exchange-rate volatility can complicate decisions concerning trade and investment and constrain a country’s economic growth. Understanding what contributes to a currency’s volatility is an important first step in assessing whether economic policy can reduce this volatility. For South Africa, changes in global commodity prices and financial-market risk perceptions drive most of the rand’s volatility. However, local political uncertainty also emerges as a significant source of volatility. More policy and political predictability could help to smooth the rand’s volatility.