7 November 2008
The pula this week began to show signs of strengthening against the US dollar on the back of similar movements by the South African Rand, appreciating from as low as P8.5 per dollar in October to P7.69 on Wednesday.
Due to the link between Botswana's economy to South Africa's, when the rand weakens against the dollar, the pula also follows suit, although not by the same margins. The pula simultaneously gains against the rand.Over the past two weeks, the rand fell to as low as R12 to the dollar, but by Wednesday this week, it had managed to gain some ground, trading at R9.58 against the dollar. Analysts believe it will continue on that path for some time as sentiment towards high-risk assets improves.
Consequently, the pula has begun to gain against the dollar as the see-saw in the financial markets continues.During the month of October when the rand was at the lowest against the dollar, the pula depreciated against most major trading currencies except the rand against which it appreciated by 6.8 percent. The largest depreciation was 21 percent and 13.9 percent against the Japanese Yen and US Dollar respectively.
Statistics from the Bank of Botswana (BoB) show that on an annual basis, the pula fell against all major trading currencies except the rand against which it appreciated by 13.7 percent. The annual largest depreciation was 37.1 percent against the Japanese Yen. On the other hand, the exchange between the rand and the pula, which had appreciated to as much as 75thebe per rand, has begun to weaken, ending Wednesday trading at 80thebe per rand.
Two months ago, the pula was trading at just under P7 per dollar, but it has weakened to as low as P8.7 per dollar as it follows in the footsteps of the currency of Botswana's biggest trading partner, the South African Rand.The unfolding global financial crisis, which has seen international credit lines squeezed, has taken a huge toll on the rand as South Africa is dependent on international markets for its balance of payments support.In the period, the rand has weakened against the dollar from around R8 to over R11 per dollar.
As the markets continue to move up and down due to the turmoil, the exchange rate swings are expected to persist as well, much to the detriment of mostly the business sector.Analysts believe the ideal situation would be for the currency to be stable so that businesses can plan properly rather than for the currencies to continuously fluctuate.
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