As at end of June 2016, the local currency ÔÇô the Pula appreciated by 10 percent against the South African rand, while it depreciated by 8.8 percent against the SDR, latest money markets data provided by the Bank of Botswana (BOB) have shown.
The appreciation of the local currency against the neighbouring country’s Rand during the period under review has been attributed to the latter’s volatility against some major currencies in the Pula basket. The data follows a revision in which the Pula currency basket, whose weights were maintained at 50 percent South African Rand and 50 percent IMF’s Special Drawing Rights (SDR), experienced a small upward crawl rate of minus 0.38 percent per annum which was adopted for 2016.
The data comes shortly after research analysts at Barclays Bank Africa said that the outlook of the Pula remains largely dependent on the South African’s Rand performance, given the crawling peg exchange rate mechanism. Lead researchers at Barclays Africa, Dumisani Ngwenya and Ridle Markus noted late last month that given an expectation for the South African Rand’s depreciation, there is likelihood of a weakening bias on the Botswana Pula in the months ahead.
At the same time, the Barclays researchers said that the upcoming inclusion of the Chinese Renminbi (RMB) into the SDR basket carries implications for the Pula. The RMB is expected to be added to the SDR basket at the beginning of October this year with a weight of 10.92 percent.
“Although the South African Rand will remain the primary driver, in the rates space, we believe yields are likely to remain anchored into 2017 amid limited supply (auctions occur quarterly in sizes of about BWP1billion, with the next bond maturity due only in March 2017) and favourable liquidity conditions. The 182- bill yield was at a historic low of 1.16 percent at the most recent auction, remaining in the red on an inflation-adjusted basis,” the Barclays executives said.
For the past seven months, the world has been watching the South African currency, Rand, become a crisis spectacle. The Rand’s value is reported to have plunged by about 26 percent since June last year. It reached a record low of R17.9950 to a US Dollar earlier this year following a sustained decline. It is also predicted that the Rand will for the rest of this year remain under strain with the likelihood of slipping further down.
The Barclays findings follows predictions made earlier this year by some leading macro-economic analyst, Dr Keith Jefferies that the strength of the Pula will ‘slightly’ increase. This was after an adjustment of the rate of crawl by 0.38 per cent.
The Pula basket of currencies currently comprises the South African Rand and the International Monetary Fund (IMF) Special Drawing Rights (SDR) which consists of the US Dollar, Japanese Yen, the Euro and the British Pound Sterling.
During 2015, the weights of the Pula basket of currencies were 50 per cent South African Rand and 50 per cent SDR, with the rate of crawl set at zero per cent per annum.
