Rand Declining? How Offshore Currencies and Global Companies Could Protect Your Wealth

The rand is facing significant pressure, driven by US President Donald Trump's new tariffs and the looming threat of South Africa’s government of national unity collapsing. As a result, the currency has rapidly been losing value.

Why does this matter?

A weaker rand means higher costs for fuel, groceries, and other imports, which in turn drives up inflation and reduces purchasing power. It can also lead to increased interest rates, making debt more expensive. Last week, the rand plummeted more than 3% following Trump’s tariff threats.

What are tariffs?

Tariffs are taxes on imported goods, often designed to protect domestic industries by making foreign products more expensive. While they can shield local businesses, tariffs also raise prices for consumers and may provoke retaliatory actions from trade partners, disrupting global supply chains and trade relations.

Impact on global markets

Trump’s latest tariff threats have unsettled global markets, causing sell-offs in stocks, commodities, and emerging market currencies. South Africa, being a trade-sensitive market, also saw a decline. The uncertainty surrounding these trade tensions has led to increased volatility and a pullback from riskier investments.

Currency exposure through ETNs

For those looking to hedge against rand volatility or capitalize on currency fluctuations, exchange-traded notes (ETNs) such as the ABSA NewWave ETNs provide exposure to major currency pairs. These ETNs track currencies like the US dollar, euro, and British pound against the rand. Additionally, they may offer interest on the tracked currency, which is passed on to the noteholders of the ETNs.

During periods of global uncertainty and local currency weakness - such as in the wake of tariff shocks - these ETNs can serve as a means to diversify and potentially gain from forex fluctuations without direct participation in currency markets.

Conclusion

Diversifying investments offshore is an effective way to reduce risk, particularly when the rand is volatile. Spreading assets across global markets lessens exposure to local economic shocks and currency fluctuations. EasyEquities EasyFX simplifies the process of converting rands into foreign currencies, offering the flexibility to invest internationally in global companies. This approach could provide a practical way to safeguard and grow wealth beyond South Africa’s borders. To learn more about EasyFX visit our FAQ portal or click below to learn more about EasyFX on EasyAcademy.

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