FX Monthly Chart Book
- The rand has strengthened significantly in recent weeks and is strong relative to its emerging market peers. The recent gains have also left the currency strong relative to its key historical benchmarks on a real trade-weighted basis.
- When adjusting for growth, inflation, terms of trade, and monetary and fiscal policy differentials, the current rand strength is justified by the prevailing global and local fundamentals. It has in particular been supported by favourable and strong terms of trade. While we acknowledge that there may be further pockets of strength, we believe that the scope for further rand appreciation, on a sustainable basis, is limited.
- Our model suggests that the rand is currently trading around its fair value. However, we expect the support from the terms of trade to moderate in H2:21 which will see the rand weaken from current levels somewhat towards the back end of the year.
- We have strengthened our year-end target to R14.70/$ from R15.00/$ and to average R14.57/$ from R14.95/$ previously.