The SA Daily
13 March 2019
Shaky sentiment, weak rand
Shireen Darmalingam
- As an emerging market currencry, the rand has had a mixed performance to the dollar, weakening by 0.1% since January. The RUB however has been a top performer, gaining over 6%. The CLP, THB and COP too have made moderate gains this year. The ARS has lost significant ground, declining over 9%, while the RON, TRY and PLN have posted smaller losses this year.
- The rand shed 1.5% last week on shaky sentiment after comments by President Ramaphosa on the nationalisation of the central bank. It breached technical levels, weakening to R14.58/$. This is the weakest level since 3 January. Sentiment has been souring due to SA’s many idiosyncratic risks. Also, the risk of negative ratings action by Moody’s on 29 March still looms.
- Nevertheless, we still see the rand as undervalued, and we expect it to firm after the national elections of 8 May, contingent on much-needed policy reforms after these elections.
- In the meantime, policy uncertainty will weigh on the rand.
- We see the rand at R13.40/$ by year-end but we remain watchful of developments that could derail our growth and currency views.
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