20 May 2019
Rand risks remain
Shireen Darmalingam
- Last week, the trade-weighted dollar gained 0.7% after better-than-expected US economic data; housing market, labour data and sentiment statistics last week all overshot expectations. Emerging market currencies, including the rand, bore the brunt, mostly losing ground last week.
- However, the rand was somewhat supported by SA’s favourable election outcome, and reached a low of R14.13/$ last week. However, it is still 1.8% weaker due to the stronger dollar which will likely remain so this week due to the US-China trade war.
- We nonetheless still see the rand as undervalued, and believe that it will firm to R13.40/$ by year-end, premised on imminent SA reforms, the first of which will be President Ramaphosa’s first cabinet. An announcement is due this week.
- The South African Reserve Bank’s Monetary Policy Committee will meet this week. We expect the MPC to keep the repo unchanged at 6.75%. Markets will watch the statement for clues on changes to the bank’s economic growth and inflation trajectories.
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