Rand back over R14/$ and getting weaker in run-up to election, poll shows

Strategists were almost evenly split whether the rand will be closer to their fair value estimates this time in 2019, with most suggesting the rand was correctly trading firmer than R14/$ until about 12pm on Thursday.

The currency has gained more than 10% in the past two months due to better sentiment towards emerging markets. That led to hopes in November that the currency had room to gain a further 2% by this time in 2019.

Still, “the rand is expected to be volatile with the upcoming elections, due to continuing structurally low South African economic growth and tighter US monetary policy as 2019 progresses,” Nedbank economist Johannes Khosa said.

This is despite the economy expanding 2.2% in the third quarter, snapping out of recession after a revised 0.4% contraction the previous quarter.

SA is expected to grow 1.5% in 2019, far from being enough to solve a chronically high jobless rate of 27.5% of the labour force.

The rand also faces challenges such as prospects for higher interest rates in the US, likely to bolster the dollar, although a slower pace of hikes there will likely give the currency something of a reprieve.

The Fed has raised interest rates eight times since it began a tightening cycle in December 2015, including three times so far in 2018. It is widely expected to raise rates again in December.

Other challenges the country faces is an ongoing tussle between the world’s two biggest economies — China and the US — likely disturbing trade, while at home massive unemployment, social inequality and land reforms will weigh.


Source: businesslive.co.za