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Standard Bank Group
The SA Daily 15 May 2018

Rand looks marginally weaker but only near term

Shireen Darmalingam

  • Market adjustments over the past few weeks have not derailed our relatively constructive outlook for the rand in the medium term. The rand weakened against all the major currencies in April and early May but it is now weaker only against the dollar than it was a month ago, and marginally stronger against the euro and pound.
  • Our head of G10 strategy Steven Barrow expects that the dollar could further strengthen slightly in the near term, to around EURUSD1.15 by August 2018, after which he maintains his forecast for a bearish trend towards 1.20 by end-2018 and 1.36 by end-2019.
  • We thus preserve our forecasts for R12.50/$ by end-2018 and R12.70/$ by end-2019 despite potential further near-term dollar strength keeping the rand slightly weaker this year than we initially anticipated. However, we change our Q2:18-end forecast to 12.30, from a previous estimate of 12.00, and forecast an average of R12.26/$ for 2018. Nonetheless, we still believe that the rand is supportive of a benign inflation outlook.

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