Rand set to firm agains the US dollar

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NewRandMoney

Reuters.

Johannesburg - The South African rand is set to rise this year after losing almost 5 percent against the dollar in 2012, a Reuters poll showed on Wednesday.

The poll of 33 analysts and strategists, taken this week, suggested the currency will follow an upward path in 2013, eventually gaining more than 3 percent to 8.62 against the dollar in twelve months.

It was trading around 8.92 per dollar earlier on Wednesday.

“We expect no further fiscal slippage (this year) - extension to the time period in which the fiscal deficit reaches 3 percent of GDP - in the budget and hence the rand to strengthen back toward its fair value,” said Annabel Bishop, economist at Investec.

The government is projecting a current account deficit of 3.0 percent of GDP in the fiscal year to March 2015.

Bishop added the fair value of the rand was around 8 to the dollar and was weakening at the moment because Africa's largest economy is lagging the global recovery.

Tepid domestic demand will limit economic growth to 2.6 percent in 2013, although better than the 2.3 percent seen in 2012, the latest Reuters Econometer poll predicted.

In the next three months, the rand is expected to remain under pressure, hovering around 8.9 per dollar, as investors fret about the current account gap, which has been widening.

“It (rand) is at weaker levels now and barring any more flare ups in the mining/farming sectors it should regain its wider risk relationship,” said Christopher Shiells, an analyst at Informa Global Markets.

The rand weakened last year following the worst labour strife since the end of apartheid and South Africa's widest current account deficit in nearly four years.

With a flood of central bank cash, global investors are looking ready to move into riskier assets which should in theory help the rand gain.

The rand breached the psychological 9 per dollar level twice in the last four months undermined by sovereign rating downgrades from Moody's, Standard & Poor's and Fitch. - Reuters


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