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South Africa FX 05 November 2021

FX Monthly Chart Book

Shireen Darmalingam

  • The rand has weakened in recent days on the back of fragile global risk appetite, elevated global inflation and subsequent expectations of tighter monetary policy and weaker economic growth. It lost 2.3% against the dollar in October and was 2.0% and 3.3% weaker against the euro and pound respectively. The rand traded in a range of R14.35/$ to R15.49/$ in October.
  • The resumption of power cuts also reignited concerns about the economic recovery. The economy is expected to rebound to 5.2% this year and 2.1% in 2022. However, the recovery is contingent on a global economic recovery and the further containment of the virus, and loadshedding remains a downside risk.
  • Local risk events, such as the tabling of the Medium-Term Budget Policy Statement next week and the final MPC meeting later this month, could see the rand remaining volatile in November and December. However, a growth-friendly budget with a less burdensome fiscal position could provide support to financial markets and the rand.
  • We see the rand ending the year at R14,70/$ and averaging R14,61/$.

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