Does the movement of money between the two countries have a measurable impact on currency values?

How Cross-Border Remittance Flows Really Influence ZAR/USD Exchange Rates: A Practitioner’s Look Summary: Ever wondered if the money sent by people between South Africa and the United States can really shake up the ZAR/USD exchange rate? As someone who's dabbled in both personal remittances and cross-border business payments, I’ve seen firsthand how these flows work—and how little (or much!) they might matter at the big-picture level. This article steps away from textbook theory and dives into real-world processes, expert opinions, and a few bumps I hit along the way. Plus, I’ll compare how “verified trade” is handled on both sides, referencing actual regulatory docs and including a table for clarity. Cracking the Mystery: Can Remittances Move Major Currencies? Let’s be honest: when people talk about currency markets, they usually mean massive institutional trades, not your cousin sending a few hundred dollars from Johannesburg to New York. But if you add up all the individuals, families, and small businesses moving money, could that actually nudge the ZAR/USD rate? I had this question myself after a payment from my South African relatives seemed to arrive just as the rand took a nosedive. Coincidence? Or was our family cash part of a bigger trend? Step-by-Step: How Money Moves and What Happens in the Market Let’s walk through what really happens behind the scenes, using my own remittance as an example. Initiating a Transfer: I used Wise (formerly TransferWise), but the process is similar with banks like FNB or Citibank. I sent ZAR from my Capitec account to a friend’s US-based Wells Fargo account. Currency Exchange: Wise converts my ZAR to USD at a rate just a hair above the actual “mid-market” rate, minus a small fee. But here’s the kicker: they pool all customer orders and batch-convert them in the forex market, so my small transfer isn’t even a blip on the radar—unless thousands of us are sending money at the same time. Market Impact: Here’s where it gets interesting. Let’s say there’s a surge in South Africans sending money to the US (maybe to pay for tuition, or during a political crisis). The bank or transfer service needs to buy USD and sell ZAR. If this happens at scale, it can put downward pressure on the ZAR, making it weaker against the USD. But according to the Bank for International Settlements, global forex markets trade over $7.5 trillion daily—remittance flows are a drop in that ocean. What the Data Says (and Where It Gets Messy) I dug up stats from the World Bank’s Remittance Data: South Africa sends out around $1 billion in remittances each year, much of it to neighboring countries, and receives far less from the US. Compare that to total forex flows and you see why most currency analysts shrug. However, in times of crisis—think sudden spikes in remittance outflows due to political turmoil or new tax laws—these flows can become locally significant, at least for a day or two. The South African Reserve Bank (SARB) sometimes mentions these in their quarterly bulletins, but they rarely attribute major ZAR/USD swings to remittance flows alone. Let’s Get Technical (But Not Too Much): Regulatory and Trade Verification Differences I once tried to send a business payment from Cape Town to New York, and ran smack into a wall of bureaucracy. Turns out, South Africa has strict exchange controls enforced by the SARB, while the US is far more relaxed—unless you’re moving big money, in which case the Office of Foreign Assets Control (OFAC) steps in. Here’s a quick table comparing “verified trade” standards for remittances and business transfers: Country Trade Verification Name Legal Basis Enforcement Agency South Africa Balance of Payments Reporting; SARB Exchange Control Exchange Control Regulations (1961); FIC Act South African Reserve Bank (SARB); Financial Intelligence Centre (FIC) United States OFAC Reporting; AML/KYC Compliance Bank Secrecy Act; OFAC Regulations Office of Foreign Assets Control (OFAC); FinCEN If you’re curious, check the SARB’s official exchange control page and the US OFAC site for more details. Industry Voices: What Do the Experts Say? I reached out to a former Standard Bank forex trader, now consulting for expats. Here’s her take: “Remittances, unless they spike dramatically, rarely move the ZAR/USD needle. What matters more are big-ticket items—trade settlements, portfolio flows, and central bank interventions. But in thin markets or during periods of panic, even retail flows can exaggerate moves. Watch holidays and political events—that’s where you’ll see small flows amplified.” I also found a great thread on the MyBroadband forum where users share their real remittance experiences. One poster described how a sudden rush to move ZAR offshore ahead of new tax rules led to longer transfer times and, allegedly, a slightly weaker rand for a few days (though no one could prove causality). Case Example: When Remittance Flows Did Matter (Sort of) During the COVID-19 lockdowns, I tried to wire funds from the US back to South Africa. The banks were overwhelmed, and the rand was in freefall. I noticed a weird pattern: as South Africans overseas sent money home (often to help family), the ZAR strengthened slightly for a few hours each morning—before big institutional trades crushed it again by mid-afternoon. This aligns with OECD research showing that remittances can cushion currency falls in times of crisis, but only temporarily. A Few Surprises and Missteps Let’s be real: I once tried to “time the market” and send money when the ZAR seemed strong, only to get burned by a midday policy announcement. The lesson? Unless you’re moving millions, your remittance probably won’t move the needle—but you can still get caught in the crossfire of bigger market forces. Final Thoughts: So, Do Personal Flows Matter? To sum up: for everyday people, the ZAR/USD rate is mostly set by big-picture forces—think international trade, institutional investing, and central banks. Individual remittances, even when pooled, rarely have a measurable effect unless they spike dramatically or coincide with thin market conditions. That said, for families and small businesses, timing can matter: sudden regulatory changes, political events, or financial crises can briefly amplify the effect of remittance flows. Always check the latest from SARB or the US Treasury before making a large transfer. If you want to dig deeper, check out the BIS Triennial Survey for forex market stats, or the World Bank Remittance Data for country flows. Next Steps & Recommendations If you’re sending money between South Africa and the US, use reputable services, watch for news that might shake the market, and don’t worry too much about “moving the market” yourself. For business, make sure you’re compliant with local exchange control and reporting requirements—the paperwork is real, and so are the fines (trust me). Further Reading & Resources South African Reserve Bank: Exchange Control US Treasury: OFAC BIS: Foreign Exchange Markets World Bank: Remittance Flows MyBroadband Forum: Real User Experiences If you have questions or want to share your own remittance story, drop a comment or email—I love hearing about the realities behind the stats!

Timothy's answer to: How do remittance flows from South Africa to the US and vice versa affect the ZAR/USD exchange rate?

How Cross-Border Remittance Flows Really Influence ZAR/USD Exchange Rates: A Practitioner’s Look

Summary: Ever wondered if the money sent by people between South Africa and the United States can really shake up the ZAR/USD exchange rate? As someone who's dabbled in both personal remittances and cross-border business payments, I’ve seen firsthand how these flows work—and how little (or much!) they might matter at the big-picture level. This article steps away from textbook theory and dives into real-world processes, expert opinions, and a few bumps I hit along the way. Plus, I’ll compare how “verified trade” is handled on both sides, referencing actual regulatory docs and including a table for clarity.

Cracking the Mystery: Can Remittances Move Major Currencies?

Let’s be honest: when people talk about currency markets, they usually mean massive institutional trades, not your cousin sending a few hundred dollars from Johannesburg to New York. But if you add up all the individuals, families, and small businesses moving money, could that actually nudge the ZAR/USD rate? I had this question myself after a payment from my South African relatives seemed to arrive just as the rand took a nosedive. Coincidence? Or was our family cash part of a bigger trend?

Step-by-Step: How Money Moves and What Happens in the Market

Let’s walk through what really happens behind the scenes, using my own remittance as an example.

Initiating a Transfer: I used Wise (formerly TransferWise), but the process is similar with banks like FNB or Citibank. I sent ZAR from my Capitec account to a friend’s US-based Wells Fargo account.
Currency Exchange: Wise converts my ZAR to USD at a rate just a hair above the actual “mid-market” rate, minus a small fee. But here’s the kicker: they pool all customer orders and batch-convert them in the forex market, so my small transfer isn’t even a blip on the radar—unless thousands of us are sending money at the same time.
Market Impact: Here’s where it gets interesting. Let’s say there’s a surge in South Africans sending money to the US (maybe to pay for tuition, or during a political crisis). The bank or transfer service needs to buy USD and sell ZAR. If this happens at scale, it can put downward pressure on the ZAR, making it weaker against the USD. But according to the Bank for International Settlements, global forex markets trade over $7.5 trillion daily—remittance flows are a drop in that ocean.

What the Data Says (and Where It Gets Messy)

I dug up stats from the World Bank’s Remittance Data: South Africa sends out around $1 billion in remittances each year, much of it to neighboring countries, and receives far less from the US. Compare that to total forex flows and you see why most currency analysts shrug. However, in times of crisis—think sudden spikes in remittance outflows due to political turmoil or new tax laws—these flows can become locally significant, at least for a day or two. The South African Reserve Bank (SARB) sometimes mentions these in their quarterly bulletins, but they rarely attribute major ZAR/USD swings to remittance flows alone.

Let’s Get Technical (But Not Too Much): Regulatory and Trade Verification Differences

I once tried to send a business payment from Cape Town to New York, and ran smack into a wall of bureaucracy. Turns out, South Africa has strict exchange controls enforced by the SARB, while the US is far more relaxed—unless you’re moving big money, in which case the Office of Foreign Assets Control (OFAC) steps in. Here’s a quick table comparing “verified trade” standards for remittances and business transfers:

Country	Trade Verification Name	Legal Basis	Enforcement Agency
South Africa	Balance of Payments Reporting; SARB Exchange Control	Exchange Control Regulations (1961); FIC Act	South African Reserve Bank (SARB); Financial Intelligence Centre (FIC)
United States	OFAC Reporting; AML/KYC Compliance	Bank Secrecy Act; OFAC Regulations	Office of Foreign Assets Control (OFAC); FinCEN

If you’re curious, check the SARB’s official exchange control page and the US OFAC site for more details.

Industry Voices: What Do the Experts Say?

I reached out to a former Standard Bank forex trader, now consulting for expats. Here’s her take:

“Remittances, unless they spike dramatically, rarely move the ZAR/USD needle. What matters more are big-ticket items—trade settlements, portfolio flows, and central bank interventions. But in thin markets or during periods of panic, even retail flows can exaggerate moves. Watch holidays and political events—that’s where you’ll see small flows amplified.”

I also found a great thread on the MyBroadband forum where users share their real remittance experiences. One poster described how a sudden rush to move ZAR offshore ahead of new tax rules led to longer transfer times and, allegedly, a slightly weaker rand for a few days (though no one could prove causality).

Case Example: When Remittance Flows Did Matter (Sort of)

During the COVID-19 lockdowns, I tried to wire funds from the US back to South Africa. The banks were overwhelmed, and the rand was in freefall. I noticed a weird pattern: as South Africans overseas sent money home (often to help family), the ZAR strengthened slightly for a few hours each morning—before big institutional trades crushed it again by mid-afternoon. This aligns with OECD research showing that remittances can cushion currency falls in times of crisis, but only temporarily.

A Few Surprises and Missteps

Let’s be real: I once tried to “time the market” and send money when the ZAR seemed strong, only to get burned by a midday policy announcement. The lesson? Unless you’re moving millions, your remittance probably won’t move the needle—but you can still get caught in the crossfire of bigger market forces.

Final Thoughts: So, Do Personal Flows Matter?

To sum up: for everyday people, the ZAR/USD rate is mostly set by big-picture forces—think international trade, institutional investing, and central banks. Individual remittances, even when pooled, rarely have a measurable effect unless they spike dramatically or coincide with thin market conditions. That said, for families and small businesses, timing can matter: sudden regulatory changes, political events, or financial crises can briefly amplify the effect of remittance flows. Always check the latest from SARB or the US Treasury before making a large transfer. If you want to dig deeper, check out the BIS Triennial Survey for forex market stats, or the World Bank Remittance Data for country flows.

Next Steps & Recommendations

If you’re sending money between South Africa and the US, use reputable services, watch for news that might shake the market, and don’t worry too much about “moving the market” yourself. For business, make sure you’re compliant with local exchange control and reporting requirements—the paperwork is real, and so are the fines (trust me).