Reuters poll: rand to steady from sell-off

The rand is expected to tread a resilient and steady path over the next year in the face of global uncertainties and local budget and economic growth challenges, a Reuters poll of foreign exchange strategists found yesterday.

A Moody’s review of South Africa’s sovereign debt rating next week, the medium-term budget review at the end of the month and an economy struggling to get out of recession are all near-term hurdles for South Africa.

The latest Reuters survey, taken this week, showed that the rand is expected to be stable in 12 months, firming about 1% to R14.25 per US dollar from the current R14.40 rate.

The rand – an actively traded and volatile currency – sold off about a tenth of its value in August alone, caught up in an emerging market meltdown triggered by Turkey and Argentina’s domestic politics and macroeconomic fundamentals.

“We expect the overshoot of the rand to fade further, but it will likely remain undervalued in the near term to reflect lingering uncertainties and risks,” said Standard Bank economist Elna Moolman.

The deputy governor of the SA Reserve Bank on Tuesday said the Bank would only intervene to protect the currency if “excess volatility or abrupt and disorderly adjustments” threaten the functioning of the market.

Still, the central bank has not been seen actively intervening in the currency market in recent years. Instead, it has mainly stuck to using its repo rate according to its mandate of keeping consumer inflation in its 3%-6% band.

The repo rate is currently sitting at 6.5%, while yearly inflation slowed to 4.9% in August.

Last month, the Reuters FX poll showed many emerging market currencies, which have had a torrid few months, will bounce back, at least partially against the US dollar in a year as weakening growth momentum takes the shine off the greenback.

The rand recovered somewhat at the end of last month from this year’s weakest levels in August, which escalated to R15.69 early last month. It is still down almost 16% this year. – Reuters

Moneyweb

The department of rural development and land reform is clueless about solving the land problem in South Africa and should be closed down or placed under National Treasury’s supervision, says advocate Tembeka Ngcukaitobi.

Ngcukaitobi is the author of The Land Is Ours: South Africa’s First Black Lawyers and the Birth of Constitutionalism and a member of President Cyril Ramaphosa’s new land reform advisory panel. He was speaking at a Rapport and City Press land indaba.

We expect the overshoot of the rand to fade further, but it will likely remain undervalued ...

Elna Moolman Standard Bank economist