Fund Review
The rand lost 5.9% against the dollar during the quarter as money flowed out of riskier investments like emerging market equities and commodity - related currencies and into US government bonds. As usually occurs during a so-called "risk-off" environment, the dollar strengthened against most other currencies too, including the pound and euro.

During the year to end June, the rand lost 16.9% against the dollar as emerging market currencies (especially commodity - related ones) got hit on the back of much weaker commodity prices. The dollar gained against both the pound and euro during this period.

The underlying Fidelity Institutional US Dollar Fund has as its objective to offer capital preservation, daily liquidity and a stable net asset value, whilst producing a return to the investor in line with money market rates. The fund is rated AAA by Standard & Poors and by Moody's Rating Agency. The fund holds money market instruments with a weighted average maturity of 36 days and is paying a yield higher than its benchmark.

Looking Ahead
The US dollar has gained over 15% against the euro in the past year and 3.5% against the pound. This is mostly caused by investors fleeing riskier investments for the "safe haven" of US Treasury bills and bonds. If the US and other economies slip into another recession, the US dollar will most likely gain further against most other currencies, as it did during the Lehman Brothers crash. At this stage, STANLIB's house view is that the US and global economy will continue to show slow growth over the next three to twelve months. In this environment, it is quite probable that the euro and pound may bounce back against the dollar once investor confidence increases, which frequently occurs from September until early in the new year. However, there is sufficient uncertainty to warrant holding a spread of dollars, pounds and euros.

Fund Review
The dollar lost 5.3% against the rand during the quarter as money flowed back into riskier investments (so-called "risk on") and out of safe US Treasury Bills. The dollar also lost about 3% against both the euro and pound, partly on the back of the improved confidence in the eurozone from the central bank's three year loans to banks at 1%.

During the year to end March, the rand lost 11.9% against the dollar, while the dollar gained slightly against the pound (0.7%) and gained close to 6% against the euro.

The underlying Fidelity Institutional US Dollar Fund has as its objective to offer capital preservation, daily liquidity and a stable net asset value, whilst producing a return to the investor in line with money market rates. The fund is rated AAA by Standard & Poors and by Moody's Rating Agency. The fund holds money market instruments with a weighted average maturity of 36 days and is paying a yield higher than its benchmark.

Looking Ahead
The US dollar has firmed a little against most other currencies early in the second quarter of 2012 because a firmer US economy has for now dashed hopes of any further quantitative easing by the US Federal Reserve. As a result, we are seeing US Government bond yields jumping a bit also on the expectation that the Fed will stop its programme of buying bonds, which has helped keep yields at multi-low levels.

There is no question that the US economy is doing a lot better than the European or British economies. However, calling the currencies remains quite difficult at this stage. Typically one expects the euro and pound to gain against the dollar in a "risk on" environment, but of course there is no guarantee of that. So it makes sense to include a range of currencies in a cash portfolio.

Fund Review
After a sharp gain against the rand and many other currencies during the 3rd quarter of 2011, the dollar lost 0.3% against the rand during the 4th quarter as investors returned to risk-oriented investments, albeit only mildly. The fund still produced a positive rand return of 0.3% with the help of some interest earned, despite the costs of the fund.
However, during the year ended December 2011, the rand lost 18% against the dollar, helping the fund to an impressive 22.1% rand return.

The underlying Fidelity Institutional US Dollar Fund has as its objective to offer capital preservation, daily liquidity and a stable net asset value, whilst producing a return to the investor in line with money market rates. The fund is rated AAA by Standard & Poor's and by Moody's Rating Agency. The fund holds money market instruments with a weighted average maturity of 36 days and is paying a yield higher than its benchmark.

Looking Ahead
The US dollar has continued to be strong in early 2012, at least against the euro, after a good 2011, when it gained 3.2% against the euro and 0.4% against the pound. The only major currency that beat the dollar last year was the Japanese yen.

We continue to prefer the dollar at this stage, although if investors move strongly into riskier investments like equities and commodities, the dollar typically weakens because investors sell out of safe US Treasuries into offshore and other riskier investments