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South Africa FX 03 June 2022

FX Monthly Chart Book

Shireen Darmalingam

  • The rand gained ground against the majors in May; the rand was up 3.4% against the dollar in May, 1.3% against the euro, and 2.4% against the pound. The rand traded in a range of R15.38/$ to R16.32$ in May and ended the month at R15.58/$ (compared to R15.78/$ at the end of April).
  • While the rand ended May on a stronger footing it was hit by the Fed hiking rates during the month. The lockdowns in China also played its part in seeing the rand weaken to 16.32/$. In addition, ongoing geopolitical tensions between Russia and Ukraine kept trading conditions volatile in May.
  • However, the SARB hiked rates by 50 bps at its May MPC meeting which helped the rand strengthen. S&P rating agency’s upward revision of SA’s sovereign credit rating outlook to positive also alleviated some pressure on the currency.
  • We forecast the rand at R15.20/$ by end-2022 and R15.15/$ by end-2023. It should average R15.40/$ and R15.17/$ in those years respectively. We are more bullish than the consensus which is at R15.97/$ for end-2022 and less bullish than consensus for end-2023 (at R15.00/$).

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