The SA Daily
16 March 2018
Rand relative to EM
- The rand, compared to other emerging market currencies, has had the best spot returns against the dollar over the last quarter. SA’s positive political and policy momentum saw the rand enter overvalued territory, thereby discounting some gains. However, there have been material swings over the past two weeks, driven by local and global events and/or data, which saw the rand lose some ground.
- he rand is nonetheless on target for our end of Q1:18 forecast of R11.80/$. We see SA political and policy developments as remaining positive but unlikely to push the bond or currency markets much further. Therefore, global factors may be the key currency driver this year. Our base case is that the global macroeconomic backdrop will remain benign despite monetary policy normalisation in some advanced economies.
- The next key event is the Moody’s credit rating review due on the next scheduled review date of 23 March. We maintain our view that Moody’s will not downgrade SA, now also the consensus expectation. Our base case view is that Moody’s will maintain the negative rating outlook. Any downgrade could negatively affect the rand, we believe temporarily.
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