Rand’s future like ‘throwing a dart’ R13

PREDICTING the performance of the South African rand against the major trading currencies over the next five months is akin to “throwing a dart”, economists and market analysts said yesterday.

There seemed to be no consensus on the market with some predicting that the rand would fall to as low as R14 to the dollar on the back of the growing political and economic uncertainty, while others saw the local unit strengthening to trade between R12.50 and R13 against the greenback.

Research analyst at Nomura, Peter Attard Montalto, yesterday predicted the rand to trade at R14 against

The median rand/ dollar exchange rate prediction

the dollar by year end, ahead of the ANC national conference in December, which is expected to elect President Zuma’s successor.

“We still think that growing political noise into a win for Nkosazana Dlamini-Zuma in December, a growth shock at Q2 GDP coming out in September, stalled consolidation and higher issuance in the October medium-term budget policy statement and the market finally seeing the very real threats to the economy from debates around the SARB and land reform will all come home to roost eventually,” Montalto said.

“Foreign flows into South Africa remain very supportive on the bond side, though less so on the equity side. The spike in net foreigner inflows around the time of the reshuffle meant the market reaction was particularly muted and allowed the rand appreciation trend to continue shortly after,” he added.

Rebalance Fund Managers economist Dr Chris Harmse said the rand would trade between R13.80 and R14 owing to higher US interest rates, possible lower SA interest rates and political uncertainty in the lead up to the elective ANC conference in December.

Old Mutual Investment Group economic strategist, Rian Le Roux said: “If you look at the short term volatility of the rand, just recently trading at below R12.50/$ and R13.60/$ within just a few months, forecasting a number 6 months hence is as good as throwing a dart. One might have ventured such a prediction had the ZAR been clearly over- or undervalued, but that is not the case presently, as the ZAR seems pretty reasonably valued.”

Le Roux said it would experience short term volatility in the next 12 months driven by news, event or data flow. “It is hard to see much of an improvement below R13 in the absence of much better news flow.”