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The SA Daily 08 February 2019

Rand in some retreat

  • The rand has sacrificed some of its January gains due to the US dollar rebounding and due to fears of euro zone growth slowing.
  • The rand was R14.38/$ at end December 2018 and had gained 8% to R13.31/$ by end January 2019. But, thus far in February, it has lost 2.5% – currently trading at R13.64/$.
  • Likewise, SA 10-year generic government bond yields have risen, to 9.15%, from 9.09% at end January. Foreign net buying of SA bonds in January was R11.3bn; SA equities net selling came to R14.9bn. Foreign bond selling amounted to R0.52bn 4 – 7 February. Over this time, foreigners continued selling SA equities to the value of R2.2bn. Consequently, the nominal effective exchange rate of the rand has also declined. 
  • We see the rand at R14.00/$ by end-Q1:19. In the medium term, we are more bullish than the consensus view, premised firstly on our G10 strategist’s view that the US dollar will weaken into year-end, and secondly on our view of constructive economic reforms after the SA elections in May 2019 as well as sovereign ratings remaining steady.
  • We view last night’s State of the Nation Address by President Ramaphosa’s as reasonably comprehensive (see details overleaf).

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