Rand likely to gain just 2% in a year, poll shows.

South Africa’s rand is expected to trade just 2% higher in a year as local economic reforms kick in and support the currency, but it may be held back by a potentially more hawkish US Federal Reserve, a Reuters poll found.

The survey of 35 currency strategists, taken in the past three days, suggests the rand will be 2% stronger from Wednesday’s 14.80 in 12 months, at 14.50 per dollar.

“Once the Fed signals the end of the tightening cycle at some stage next year, we expect the rand to embark on a (firmer) trend,” said Piotr Matys, a currency strategist at Rabobank.

“(That) could be potentially supported by an improvement in economic fundamentals should structural reforms be fully implemented,” Matys said.

The Fed has raised interest rates three times this year in a bid to restrain inflation. It is widely expected to lift them again in December and three times more next year.

Previous polls have suggested it may be roughly another six months before the dollar’s strength fades.

Many emerging-market currencies were expected to rebound at least somewhat against the dollar in a year as weakening growth momentum takes the shine off the US currency. Some, like the Brazilian real, Turkey’s lira and Argentina’s peso, have started to firm in the past month.

Still, October was the first full month after the latest US tariffs went into effect and US President Donald Trump has threatened China with more duties, a worrying prospect for emerging markets like South Africa.

Elize Kruger at NKC African Economics says the rand’s fair value is around 13.65 per dollar, so is in under-valued territory.

“But we do not foresee the rand reaching that level in the short term, maybe after general elections due in May,” she said.

Earlier this week, the central bank said it may be forced to to raise interest rates as inflation remains “uncomfortably” near the upper end of its 3% to 6% target range and economic growth is lagging.

Consumer inflation was 4.9% in September, and Reuters polls expect it to average 4.7% this year and quicken to 5.4% next year.

A separate Reuters poll last month forecast that rates would rise 25 basis points to 6.75% either in January or March.

While the Reserve Bank is considering raising rates they will not rise as steeply as in other emerging markets, which are being forced to respond to deep currency sell-offs.