02 March 2018
Rand as EM currency reaping benefits of higher rates
- SA’s policy rates, compared to EM peers, show SA as among the top five with higher policy rates, namely Russia, Turkey, Mexico, SA and Brazil (see chart below). This is expected to continue this year.
- SA’s CDS is lower though than Brazil and Turkey, and could even improve further if our base case of Moody’s not downgrading SA should play out, and also should there be further credible political progress in dealing with policy issues such as “land expropriation without compensation” and “radical economic transformation”.
- As EM currency, the rand should continue to reap the benefits of the expected robust capital inflows into emerging markets.
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