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'Mixed blessing' for South Africa

By unknown | Nov 08, 2007 | COMMENTS [ 0 ]

Lihle Z Mtshali

Lihle Z Mtshali

Your money will go further this Christmas after the rand hit a 17-month high against the tumbling dollar yesterday.

Goolam Ballim, an economist at Standard Bank, said lower importer inflation was one of the benefits a stronger rand and high commodity prices presented to the South African economy.

"A stronger rand helps contain imported goods prices, giving consumers a fair choice of Christmas gifts, especially the more popular preference of electronic goods," he said.

Commodities also over-performed yesterday, with gold reaching its highest level in nearly three decades.

It hit $835 an ounce, very close to an unprecedented high of $850 reached in January 1980. Silver soared to a 27-year high and platinum set a record as investors snapped up precious metals as security against inflation and the weakened dollar.

"This activity on the markets is a mixed blessing for the South African economy," said Ballim.

"The strong metals price is welcome as it will boost earnings for mining companies and is a prospect for good wages growth. It also gives improved terms of trade and stronger export prices which encourages an even stronger rand."

Ballim said although the strong currency was good for importers, it was potentially bad for exporters who generally find rand levels stronger than R7 difficult to show competitiveness. But, he said, it was good news for consumers who could enjoy lower prices.


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