Fund Review
The rand continued to weaken in the quarter to June, by 6.9% against the US dollar. In the first half of 2013 the rand lost 17.5% as a number of factors hurt the currency, including declining commodity prices, high trade and current account deficits, labour issues on the mines and a flight from emerging market bonds by global investors. The rand's down-trend started in April 2011 at 6.50 to the dollar and to-date the down-trend remains intact after a decline of about 55%. During the year to end June the rand lost 21.3% against the dollar. 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. However, money market yields are the lowest in decades and in most cases are insufficient to cover the costs of the fund.
Looking Ahead
Although the down-trend remains intact for now - and this always demands respect - one gets an impression that most, if not all, of the rand's decline may be over for the time being. The rand would need to strengthen and hold through about 9.40 to threaten the down-trend.

Fund Review
The rand weakened sharply during the first quarter of 2013, by 9% against the relatively firm dollar. This was despite the quarter being mostly a "risk-on" period, during which investors buy riskier investments like equities and listed property. The rand has continued its down-trend that began at 6.50 to the dollar about two years ago. Problems with our rising trade deficit (imports exceeding exports) and with our rising current account deficit (net payments going offshore) plus weak commodity prices have weighed on the rand, not to mention labour problems - or the fear of more labour problems - on the mines during wage negotiations due in April. During the year to end March the rand lost 17% against the dollar. 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. However, money market yields are the lowest in decades and in most cases are insufficient to cover the costs of the fund. There is no sign in sight of any increase in yields.

Looking Ahead
The trend remains your friend - until otherwise broken. The rand has always been tough to call because it is driven by so many different factors. Looking at the charts, one could easily envisage the rand reaching 10-plus to the dollar as the down-trend continues. After all, it went to 13.85 in late 2001 and to 12 in 2008.

That said, many think the rand's decline has been overdone and the STANLIB house view is for 8.95 at end 2013. The trend needs to be monitored closely. It seems that a break through 8.75 may abort the down-trend.