Fund Review

After finally appreciating by 81c, from 15.46 to 14.65, or +5.2% versus the dollar during the first quarter of 2016, the rand lost 4c to the dollar in the 2nd quarter, from 14.65 to 14.69. For the year to end June 2016, the rand fell from 12.17 at end June 2015 to 14.69 at end June 2016, a decline of -20.8%. Your fund, managed by Fidelity Worldwide Investment, is a triple A rated stable net asset value liquidity fund, with a focus on security and diversification of risk, whilst delivering a return in line with money market rates. The rating is the highest possible money market rating of Moodys and Standard & Poors. The fund, $3.8bn in size, does not use derivatives and has not experienced any negative returns to date, including during the mighty 2008/9 stock market crash and great recession.

The fund has a weighted average maturity of 44 days of the money market instruments in its portfolio, which typically range between thirty to forty different issuers.

Looking Ahead

So far in 2016 the dollar has declined by -2.1% against the euro and by -16.4% against the Japanese yen. So the signs are that it may finally be depreciating, although it needs to decline further against the euro to confirm this, say above $1.15 to the euro (currently $1.108).

This has a big influence on how the rand behaves. The rand has gained +4.8% against the dollar so far in 2016 by 8th July. Should the dollar continue to decline against the euro, then the rand is likely to gain further against the dollar. If South Africa’s credit rating is downgraded at the end of the year, the rand could fall further. At this stage, that is uncertain.

Fund Review

After falling by 165c in the quarter to end September, the rand depreciated by another 164c, from 13.82 to 15.46 or -11.9% to the dollar during the last quarter of 2015. For 2015, the rand depreciated by 25.5% against the dollar if you calculate it via dollar depreciation (per rand), but if calculated via how many rands the dollar buys at end 2015 versus at end 2014, it depreciated by 35%.

The fund, managed by Fidelity Worldwide Investment, is a triple A rated stable net asset value liquidity fund, with a focus on security and diversification of risk, whilst delivering a return in line with money market rates. The rating is the highest possible money market rating of Moodys and Standard & Poors. The fund, $3.8bn in size, does not use derivatives and has not experienced any negative returns to date, including during the mighty 2008/9 stock market crash and great recession.

The fund has a weighted average maturity of 45 days of the money market instruments in its portfolio, which typically range between thirty to forty different issuers.

Looking Ahead

The dollar has soared against most currencies over the past year, but especially against emerging market currencies, in particular those with big exposure to commodities, like the rand. The dollar has gained 10.2% against the world's second biggest currency, the euro, in the past twelve months.

The big question is, when will the dollar stop appreciating against other currencies. It has broadly been trading sideways against the euro over the past 10 months, between $1.05 and $1.15 to the euro (currently $1.088). If it begins to fall against the euro, then perhaps the rand will start to gain too. It is impossible to gauge just when that may occur.