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Standard Bank Group
South Africa FX 02 August 2023

FX Monthly Chart Book

Shireen Darmalingam

  • The rand gained ground in July due to local and global factors. It gained 5.3% against the dollar, 4.0% against the pound, and 4.4% against the euro. It ended July stronger, at R17.82/$ (compared to R18.84/$ as at end June).
  • Furthermore, it strengthened to an intraday low of R17.41/$ in July. However, it was volatile, trading in a range of R17.41/$ – R19.15/$. It averaged R18.17/$ in July, compared to an average of R18.72/$ in June. The rand was amongst the top-performing emerging-market currencies in July, outperformed by only the COP.
  • The rand briefly weakened through R19.00/$ in early July as labour data out of the US bolstered expectations that US rates will remain higher for longer. However, it was ultimately supported by a somewhat weaker dollar, encouraging SA economic data, and a notable easing in key concerns about factors such as SA’s perceived support for Russia and the possibility of an electricity grid collapse. The recent announcement by the SA government that Russian President Putin will not be attending the BRICS Summit in person in SA later this month too supported the rand.
  • Short-term volatility is still likely as the currency remains sensitive to global news. Recent news out of China indicating disappointing economic growth has kept the rand on the backfoot. Should local fundamentals fail to improve, further sustainable gains in the real trade-weighted rand would be unlikely. Global growth concerns, as well as idiosyncratic factors, may continue to weigh on the rand. We see the rand ending this year at R17.80/$ due to dollar weakness later in the year, as forecast by our G10 strategist. The EURUSD is expected to end the year at 1.17, from 1.09 currently, and to reach 1.31 by end 2024. We expect the rand to average R18.10/$, R20.00/€, and R23.10/£ in 2023.
  • In the medium term, the expected improvement in SA’s electricity shortfall, as well as a more supportive global economy, should impel improved economic growth expectations.

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