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Definition

An exchange rate is the rate at which one currency can be traded for another. Thus, for example, the rand trades against the US dollar at rates which fluctuate throughout the day. The same is true for many other currencies which trade against the rand and each other. These exchange rates are known as currency crosses and many of their charts can be seen in your software. For a private investor in South Africa, the strength or weakness of the rand against other currencies is very important. This is because most of the shares listed on the JSE have some exposure to the rand. Many of our blue chip companies have some or all of their business overseas. This makes them "rand hedges" which benefit from any weakness in the rand and vice versa. Examples are Sasol or Naspers. In addition, any company which exports a raw material overseas, including all our mining companies is directly impacted by the strength of the rand against the US dollar. In general, the rand is the best and most tradable of the emerging market currencies - trading an average of about R50bn a day in the currency markets and discounting less risk than other emerging markets like Turkey, Brazil or Russia.

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