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The SA Daily 06 December 2019

Rand above our year-end target

Shireen Darmalingam

  • This week’s bleak Q3:19 GDP contracting -0.6% q/q has seen the rand lose ground. The disappointing current account deficit too saw the rand stumble. The rand also had to contend with sliding PMIs. 
  • Nevertheless, the rand has been encouraged by easing tensions in the global trade war this week.
  • The rand is now 0.2% stronger than a week ago. It is below its 50-day and 100-day moving averages (R14.83/$ and R14.85/$) and above its 200-day moving average (R14.59/$). It is firmer than our year-end forecast of R14.85/$, and it has proven quite resilient against peers.
  • SA risks persist, though, specifically from Eskom. Power cuts returned as of last night, and Eskom’s constrained generating capacity will keep the rand under pressure. Fears are being exacerbated by slack progress on policy reform and a potential Moody’s downgrade next year. In November, Moody’s changed the outlook on SA’s only remaining investment-grade rating to negative, from stable. Our view remains that the rand is already discounting a Moody’s downgrade to non-investment grade next year.

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