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Standard Bank Group
South Africa FX 06 May 2022

FX Monthly Chart Book

Shireen Darmalingam

  • The rand lost ground against the majors in April on the back of a confluence of local and international factors weighing on the currency. The rand was down 7.1% against the dollar in April, 2.7% against the euro, and 3.1% against the pound. The rand traded in a range of R14.44/$ to R16.13/$ in April and ended the month at R15.78/$ (compared to R14.63/$ at the end of March).
  • The rand is one of the most sensitive emerging market currencies to higher Treasury yields and has reacted to the Federal Reserve’s hawkish monetary policy in recent days as well as concerns about the resilience of the global economy amid monetary tightening to stem elevated inflation.
  • SA is also currently faced with the aftermath of the floods in KwaZulu Natal, signs of a resurgence of Covid infections and rolling blackouts which is undermining the economy’s recovery. The flood damage and the consequent rebuilding of the province’s infrastructure as well as concerns around a 5th wave of Covid infections could hurt the country’s public finances while the government tries to stimulate the economy. At the same time, the government is trying to curb its rising debt levels.
  • We forecast the rand at R15.00/$ by end-2022 and R15.15/$ by end-2023. It should average R15.29/$ and R15.08/$ in those years respectively. We are more bullish than the consensus (at R15.50/$ for end-2022) and largely on par with the consensus for end-2023 (at R15.14/$).

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