Briefing Note: The exchange rate and the real economy - Graph 1. Exchange rates and index of metals prices (2009 = 100)

Briefing Note: The exchange rate and the real economy The appreciation of the rand since early 2016 has mixed impacts on the real economy. [...] The main factor behind the appreciation of the rand has been the increase in metals and coal prices. [...] As Graph 20 shows, indices of dollar prices for South Africa’s main mineral exports – iron ore, coal, platinum and gold – and the trade-weighted nominal exchange rate have been visibly aligned since the global financial crisis. [...] The decline in foreign direct investment reflects increasing investor uncertainty, which can lead investors to substitute short-term, liquid resources for fixed investment, as well as the shedding of assets by the mining companies since the end of the commodity boom in 2012. [...] In the event, the returns on assets across the real economy remain lower than the normal rates for South African financial holdings.