GBPZAR

GBPZAR

About GBPZAR

The Great British Pound (GBP) is a highly evolved and stable economy, the official currency of the UK. The GBP is a major currency and is one of the most widely traded worldwide. The South African Rand (Africans: Zuid-Afrikaanse Rand) is abbreviated as ZAR. ZAR is considered the most important currency on the African continent. Even with this unofficial status, the ZAR is regarded as a globally volatile currency.

South Africa is a commodity and export-based economy. Due to that, the Rand’s value is linked to global prices and is disproportionately impacted by perceptions of global economic risk. The currency pair GBP/ZAR is a common one on the forex market. Seasoned merchants prefer this trading instrument for its strong stability and predictability. During the European sessions we witness the most extreme GBP/ZAR bidding. The pound versus rand is an ‘exotic’ currency pair that can give an established investor the opportunity for strong volatility and large returns. In this combination, GBP to ZAR, the GBP is called the base currency and the quotation currency is known as the ZAR.

Historical analysis of the GBP/ZAR pair

Historically, the South African rand has seen a certain fluctuation in its conversion rates. Most notably, for a long period of time, the rand was pegged with the US dollar, using it as a reference point for its value. Statistics began declining when the nation agreed to break away from the dollar and become a floating holder of the currency. The practice lasted until 2001 until they dropped so far that it was agreed by the government to step in and alter. The South African rand fell nearly 400 percent in value from 1982 to 1994, which was the biggest impetus for the move. Nonetheless, the nation did have improved average exchange rates after the government stepped in. The South African rand has experienced a fluctuation which is expressed in their currency exchange rates. In July of that year, in 1999, the South African rand was at a rate of .106 GBP to ZAR. The height fell quickly though in 2001, with prices dropping to .051 GBP for ZAR only two years later. After that, the currency tried to rise again, hitting ZAR in early 2006 at a level of .095 GBP. Numbers continued to decline one more time, never quite reaching the peaks from a decade ago. Levels are expected to remain at around .075 GBP for ZAR in the coming years. But as the currency experiences a lot of variance, it may be difficult to tell what will happen.the country is looking to change.

About GBP

Pound sterling (symbol: £; iso code: gbp), is known as the pound or sterling in some contexts. It is the national currency of the United Kingdom, jersey, guernsey, Isle of Man, Gibraltar, South Georgia and the South Sandwich Islands, the British Antarctic territory and Tristan da Cunha. The pound sterling is the oldest regularly used currency. Also, several nations that don’t use sterling have currencies called the pound. After the US dollar, the euro and the Japanese yen, sterling is the fourth most traded currency on the foreign exchange market.

About ZAR

The South African rand, formally denoted as ZAR, was established as the country’s official currency in 1961. Formerly, the country used the South African pound, which was directly linked to the British pound. The name “rand” is a Witwatersrand derivative which is a ridge on which Johannesburg is built. This area is where most of the gold deposits in the country are found, and is therefore an appropriate reference for a name. One rand consists of 100 cents, represented originally by coins valued at 1⁄2, 1, 21⁄2, 5, 10, 20 and 50 cents. The 1⁄2 and 21⁄2 coins were taken out of circulation and replaced with a 2 cent coin. In the late 1990s, there was a big issue in the country with counterfeiting, so in 2005 the country introduced new banknotes as an attempt to combat that. The South African rand is one of the most common currencies, used in many trading operations. The huge mineral reserves allow South Africa to become the continent’s richest country.

Most Notable Factors that Influence the GBP/ZAR

  • GDP
  • Inflation or Consumer Price Index (CPI)
  • Interest rates and other central bank monetary policies apply.

Is the GBP/ZAR a good pair to trade ?

The currency pair is considered a ‘sell’ since in the short to medium term the rand will likely continue to fall relative to the pound. When formulating an trading strategy, traders should consider the relative liquidity of the GBP/ZAR. There are fewer transaction chances as an exotic pair than there are for major currency pairs.

What to Note in Trading GBP/ZAR

Thanks to this pair’s low profile and lack of professional empirical feedback. The status of macroeconomic variables influencing the GBPZAR pair performance needs to be noted. The UK economy is highly developed and stable. Industry, financial, legal, insurance, and international trade are the leading sectors. South Africa’s economy has a commodity orientation. With the country exporting black, colored and precious metals (iron ore, copper, gold), and diamonds. In this connection, for these resources the African rand rate is strongly dependent on the world prices.
 
Interest rates, trade flows, labour market and inflation statistics in the UK and South Africa are the key factors that influence GBP/ZAR. Taking into account the pair’s high uncertainty, one can exchange GBP/ZAR and get full advantage for a limited period of time. The GBP/ZAR isn’t traded regularly and any investor involved in trading in the pair should understand the need for liquidity.
 
In contrast with major currency pairs there may also be a lack of detailed technical research. Traders need to examine political and macroeconomic factors that can affect the two currencies’ prices.
 
It is also recommended that the value of both currencies relative to the US dollar be closely monitored. This may reveal key pound-to-rand forecast information. The majority of the South African economy is focused on exports. Therefore, GBP/ZAR exchange rate outlook is also associated with foreign trade and economic sentiment. Because of this high export dependence, the rand is considered a risk-averse currency. Investors tend to reduce their holdings on the basis of global uncertainty in favor of major currencies such as the US dollar, Euro and GBP.

FAQ's

To say the pound is the world’s strongest currency is not really correct. That is because currencies are always compared to other currencies such as the US dollar or the euro or the ZAR. The reason a currency is stronger compared with other countries is generally due to a combination of low-interest rates, tighter monetary policy, and a more stable view of the stability of a region. If the interest rates of a country are higher than the bonds of that country are more appealing (higher return). The higher demand for such bonds increases the currency’s worth. If the country slows down its money printing or pays off its bonds, it lowers the supply of that currency and makes the currency stronger. If the nation is deemed “free” and is more likely to pay off its debt, this will increase the currency demand and make it stronger. But some people always feel that a strong currency is always healthy. Perhaps because the term “weak” is usually deemed a bad thing. But when you have a strong currency, it becomes cheaper for foreign goods, which is positive for consumers buying foreign goods (e.g. Walmart).
One of the major factors affecting Rand’s valuation is the Federal Reserve’s improvement in the US economy and forecasts of rate hikes in the coming quarters. Any implementation of a rate hike will have a negative impact on emerging economies. Investors tend to look at developed Western economies that will result in an outflow of money to developed economies. The Rand is one of China’s most exposed currencies. Any adjustments to Chinese foreign policy have a direct impact on the Rand. After people’s Bank of China devalued the yuan by 2 per cent in mid-2015, the rand lost approximately 26 per cent of its value over the next six months. Since South Africa relies more on mineral exports, low commodity prices have caused the rand to weaken. Chinese demand for commodities has gone down due to low economic growth, resulting in lower global commodity prices. Confidence among investors is yet another factor affecting currency value. The South African government has made changes at the ministerial level which have affected the confidence of investors.

Posts Tagged With GBPZAR