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Three ways to hedge yourself against a weaker rand

by , 19 August 2015

This year so far, the rand is down over 10% against the dollar. It's a similar story with the currency's performance against the euro and the pound.

It looks like the rand is far from out of the woods yet.

So if you haven't hedged yourself against the rand's fall, what can you do now?

Read on to find out…


Rand hedge #1: Hold foreign currency


You can hedge yourself against the rand falling further by holding foreign currency.

To do this you can open up a foreign currency account with your bank. Most of the major banks offer this.

You need to complete a few forms to do this as you’ll be dipping into your annual offshore allowance. If you take more than R1 million out of SA, you’ll have to apply for clearance.

You can open an account in a number of different major currencies, such as the US dollar, the pound and the euro.

If the rand weakens further, your foreign currency will be worth more.


Rand hedge #2: Invest offshore


You can hedge yourself against the rand’s performance by investing offshore.

By investing offshore, you can protect yourself against further weakness in the currency and diversify your portfolio.

You’ll also need to use your offshore allowance for this. You’ll also need to open an international investment account to do this.


Rand hedge #3: Buy JSE-listed ETFs with offshore exposure


If you don’t want to use your offshore allowance, you can invest in a number of exchange traded funds (ETFs) that give you exposure to offshore markets. These are good rand hedges too.

You could also invest in stocks listed on the JSE that have a heavy offshore exposure. They should benefit from profits earned offshore.

So there you have it. Three ways to hedge yourself against a weaker rand.

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Three ways to hedge yourself against a weaker rand
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