Sunday, January 24, 2010

Should I stock South African rands (ZAR) for the FIFA World Cup?

Right at the onset of this post, I wish to state that as of now, I do not have as much understanding of economics/finance as I wish to.

A random thought came to my mind a few days back - will the South African currency (rand) rise against USD (and INR - the currency that matters most to me) during the FIFA World Cup (or in days around it)? The reason I thought this might happen is because of increased demand for rands from fans and tourists coming to SA for the World Cup. Is this thought even valid from economics/finance point of view, I wondered. I asked a colleague - he's an MBA - and he appreciated the thought, although his response was that he doesn't believe the rand would rise significantly against USD/INR. At least not enough to justify stocking of rands - an exercise who's feasibility I was exploring (I'm currently in South Africa and I earn a certain daily amount in rands. I'm going back to India in early April, and so it's possible for me to stock saved ZARs till the World Cup).

I decided to check the movement of the Chinese currency - CNY/RMB - during the 2008 Summer Olympics in Beijing, to see if it rose against USD/INR. I used to obtain historical currency exchange rates, and I plotted my findings in various line-charts in an Excel workbook. Unfortunately, there wasn't any material rise in CNY against USD and INR.

So I've decided to not stock ZARs, and I've also set a future reminder to check how ZAR moved during the FIFA World Cup. Let's see whether not stocking ZARs because CNY/RBM didn't rise significantly turns out to be a correct decision.

1 comment:

  1. As visible in this table, there was no rise in the value of ZAR against USD