The pula was valued at R1.44 on Monday, the strongest the local currency has been against its neighbour since January 2004, as global markets suffered a pounding from the coronavirus and plummeting oil prices.
Batswana took to social media as the week opened, marvelling at the sudden collapse in the value of the rand on Monday. According to historical Bank of Botswana opening rates, the last time the pula was stronger than on Monday was January 06, 2004 when it was measured at R1.47.
Panic over the sudden spread of the coronavirus outside China amidst rising infections and deaths, hit the global economy hard early on Monday, triggering huge drops in most major stock exchanges and currency markets.
An oil dispute between Saudi Arabia and Russia, two of the biggest producers, also collapsed prices in that market, sending tremors across global markets. On Monday, the rand flattened to its lowest level against the dollar in four years, helping to raise the pula higher against the South African currency.
Due to the workings of the crawling peg systems used to set the pula’s value, the local currency tends to rise in response to falls in the rand, while conversely also dropping against other hard currencies such as the dollar.
On Monday, even as the pula enjoyed highs against the rand, the local currency sank to P11.30 to the dollar, its lowest level since at least 1992, the year for which online records are available.
By Press time on Wednesday evening, the pula had softened from its high against the rand and
A local analyst said the trends, though temporary, generally bode well for the local economy.
“Strength against the rand is associated with lower imported inflation while a weaker pula against the dollar is good for our commodity exports.
“Ordinarily, weakening against the dollar would give rise to concerns about fuel prices which are priced in the dollar, but currently there are low global prices due to the geopolitics taking place,” the analyst said. The Botswana Stock Exchange (BSE), meanwhile, stood tall as other exchanges crumbled across the continent in the wake of the coronavirus inspired panic. The BSE’s main platform, the Domestic Companies Index (DCI), rose by 0.036% between Monday and Wednesday, while other major exchanges even had to call halts to trading, in response to the sudden collapse.
Commentators, including BIHL group CEO, Catherine Lesetedi attributed the BSE’s ‘fortitude’ to the low levels of liquidity on the local exchange.
“It is lucky in a sense that low levels of liquidity on the BSE mean it has not yet responded to the effects seen in other markets,” Lesetedi told analysts at a briefing on Wednesday morning.
Since the year began, the DCI has put on 1.4 percent compared to losses of nearly 12% for the much larger JSE.