The SA rand exchange rate complex (ZAR) is witnessing notable declines as domestic economic risks prompt sizeable transfers of currency out of the country.
Firstly it is worth pointing out that the Rand has been lower before.
Yes, in nominal terms an exchange rate of 24 against the pound and 15.88 against the dollar are the worst levels ever seen.
But as John Cairns at RMB points out, when inflation is accounted for the ZAR has been lower:
"In nominal terms, the rand is clearly at its worst ever — USD/ZAR long ago having broken the 13.84 hit very briefly back in December 2011. However, it is worth pointing out that in real inflation-adjusted terms, that 2001 level now equates to 20.50! This analysis always leaves us with the unhelpful conclusion that the rand is extremely weak but has been much-much weaker before."
The message here is there is certainly precedent for the South African exchange rate complex to fall further.
The problem for markets is that it is harder to settle down after bouts of volatilitywhen you are at unprecedented 'nominal' levels.
It seems that one of the drivers of the Rand sell-off is domestic money looking to exit the country, not necessarily foreigners selling their holdings. Again, things could be worse as foreigners could opt to do the same.
"Flows have been mixed. Foreigners were net neutral in the bond market, although with unusually high turnover. Locals were panicking, with your friendly currency analyst inundated with calls on whether to switch savings offshore. All we can do is point out that you would be moving cash offshore at an exceptionally weak exchange rate," says Cairns.
At Pound Sterling Live we have picked up a clear spike in interest in GBP to ZAR payments, indeed a good chunk of the enquiries related to shifting money out of South Africa.
The JSE has shown a more muted response to the Nene saga and has in fact gained from the weak rand, but the banking sector saw a 13% decline.
Barclays, owner of ABSA, have meanwhile confirmed they have cut their forecasts for the Rand in 2016.
USDZAR is forecast at 16.40 in March 2016, 16.75 in June and 17.50 at the end of the year.
These levels are actually around where the exchange rate is currently suggesting analysts expect near-term volatility to ultimately play out allowing the ZAR to find its longer-term ranges once more.