South African Rand was ranked the 18th most traded
  • South African Rand was ranked 18th most traded currency in the world in 2019 with an average daily volume of $72bn USD.
  • 84% trading on Rand was done outside South Africa, as per analysis by Forex Brokers SA.
  • A significant percentage of the volume is from speculative & retail driven trading.

South African Rand ranked as 18th most traded currency in the world in 2019 up from previous 20th position in 2016. The Net volume of Global trading on Rand (ZAR) was reported to be USD 72 billion daily in April 2019 according to the latest BIS Global foreign exchange market turnover under their triennial report. And trading in Rand accounted for 1.1% of the total daily FX exchange volume globally.

Rand in recent years has gained attention from investors locally & internationally mainly for speculation on ZAR pairs. The most traded ZAR pairs are ZAR/USD & ZAR/JPY globally.

Forex Brokers SA did an analysis on ZAR trading volumes, in which they compared the April month’s daily ZAR volume data of 4 years (i.e.: 2010, 2013, 2016 and 2019) both locally & globally from South Africa Reserve Bank (SARB) & Bank of International Settlements (BIS), respectively.

“In our research, we found that the global ZAR demand has been steadily rising in last 9 years. The global ZAR demand grew almost 182% from $29bn USD in April 2010 to $72bn USD in April 2019, while the local volume has been almost the same over the years”.

“It was also interesting to find that around 84% of the trading on Rand in 2019 took place outside of South Africa's economy. This was highest when compared to other BRICS nation currencies”.

“For the SA’s ZAR trading volume we used the SARB’s Monthly Release of International economic data in our analysis. We calculated the local ZAR volume by using the Net average daily turnover on the SA Foreign-exchange market transaction volume & excluding the Transactions in third currencies from it. And for global Rand daily trading volume, we used Net-Net daily turnover from BIS.” -

Rand Daily Trading Volume

Most of Trading on Rand is outside South Africa

BIS’s ZAR volume data suggests that Rand trading demand is mainly driven by global financial centres like UK, US, Japan, Hong Kong, Singapore, Switzerland & Germany - contributing 84% of the total volume.

While local ZAR trading accounted for $11.66 bn in April 19 as per South African Reserve Bank making SA, the second largest in terms of daily Rand trading volume (in USD) after United Kingdom ($44.5 bn) and just ahead of United States.

Below table shows daily Net-Gross volumes of ZAR by country in Apr 2019 according to BIS:

Net-Gross volumes of ZAR trading by country.

“We also compared international currency trading volumes of BRICS countries and found the same trend in other BRICS nation currencies with most of their demand coming from outside” -

Rand trading outside the country (83.9%) was just ahead of Brazilian Real, which was at 82.93%; while Indian Rupee, Yuan, Ruble were at 73.82%, 71.98% and 61.49% respectively.

Below table shows the percentage comparison of outside country trading volume of ZAR (Rand), BRL (Brazil Real), INR (Indian Rupee), CNY (Chinese Yuan) and Russian Ruble (RUB).

BRICS percentage of currency trading outside count

16% Rand Trading is in Foreign Exchange Market of South Africa

As the above data suggests, almost 16% of the Rand trade is being done through local financial institutions & banking system in South Africa.

These transactions include - Total spot, forward & swap transactions as reported by SARB in their Monthly release of select data under International economic data.

The daily volume of ZAR in the SA Foreign exchange market in the month of April 19 stood at $11.66 Billion USD (i.e.: spot Total spot transactions ($1.728 bn), Total forward transactions ($1.239 bn), Total swap transactions ($8.696 bn) & excluding the Transactions in third currency pairs which would not include the ZAR trading ($4.853bn)).

3 years ago, in April 2016, the local volume was higher in the same month with USD 14.69 billion and 2013, it was $15.83 bn and in 2010 it was $11.14bn.

There has been ups & downs in local volume in past decade in monthly data from SARB, but overall, the local demand & volume has been steady.

In above data, Spot transactions are foreign exchange transactions in which the exchange of two currencies is done at an agreed price for value or delivery by cash on the same day or within two business days. Like if you go to bank and exchange the currency at the same day, this might be considered a Spot transaction.

And forward Transactions are contracts or agreements to exchange two currencies in future at a rate agreed on the date of the contract for value or delivery by cash settlement. This transaction is usually at some time in the future (more than two business days later). These contracts can be used by businesses or parties to offset their risk of currency fluctuations.

While Swap transactions are combination of both Spot & Forward transactions done at the same time by the parties.

Where is Rand being traded?

Locally, South African Rand exchange volume & trading is mostly done by banks & financial institutions. While small fraction of the volume is from speculative trading, which is available as futures & options at JSE, where investors can hedge against market fluctuations or speculate on currency movements.

In 2013, JSE Currency Derivatives Market turnover crossed R1 trillion turnover. The speculative & risk hedging demand for ZAR (Rand) has been rising in past few years, as the 2017 data from the JSE suggests; currency options & future volume grew from ZAR 9.7 bn & ZAR 15.5 bn in January 2017 to ZAR72.1 billion & ZAR 89.7 billion in December 2017 respectively.

Also, there is some speculative trading volume from retail-based margin trading, done via CFD & forex brokers regulated by FSCA who offer margin trading on ZAR pairs like USDZAR, ZARJPY, ZAREUR to retail FX trading customers in South Africa.

ZAR trading outside South Africa is mainly done by banks, institutional investors, hedge funds at financial centres, mainly: UK (approx 50.6%), US (14.6%) & Japan (4.4%).

A significant percentage (13.8% i.e.: $10 bn approx) of the volume is from speculative ($7.3 bn) & retail-driven trading demand in ZAR/USD & ZAR/JPY pairs classified under others & retail-driven by BIS.

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