ANC YOUTH LEAGUE - THE DOG ATE THE LEAGUE'S PRIMER ON CURRENCY TRADING

The ANC Youth League (ANCYL) has once again put its foot in its vacuous  mouth. This time it blames Absa, its parent company, Barclays Bank, and Goldman Sachs for South Africa's weak currency.  In doing so, it conveniently ignores the fact that if the likes of Absa and Goldman did not intervene, following Nenegate, the Rand would have suffered the same demise as Zimbabwe's currency.

The rationale according to the ANCYL was to "drive down" the value of the currency, and re-purchase it by pushing up its value "as demand for it increases".

The rationale is fundamentally erroneous, based on ignorance, the companion of the ANCYL.  As the league is apparently composed of young and inexperienced members, a primer in currency trading is appropriate.

In the case of Absa, and/or Goldman,  neither "drove down" the value of the rand.  They did, however, "short" the rand by contracting to sell it at a future date without using any leverage, in the expectation it would depreciate in value.  The decision to short the currency was based on several factors: South Africa's internal problems, China slowdown, negative sentiments to emerging markets, fall in commodity prices, and return to safe haven assets, such as the US dollar and the British pound.  Of equal consideration is the inability of the Reserve Bank to support the Rand - it simply does not have the money to do so.  In essence, a perfect storm for shorting the rand.

Inasmuch as the ANCYL realizes that the nuances of free market currency trading maybe beyond its  learning curve, it should return to less esoteric undertakings, such as joining with older comrades in tearing down the Zuma Must Fall banner off the side of a building in Cape Town.