THE rand is on track to average R14.55 to the dollar this quarter, and will likely benefit for as long as the US Federal Reserve’s's dovish tone persists towards its future planned monetary policy normalisation. However, Covid-19 waves still remain a risk, according to Annabel Bishop, the chief economist at Investec.
She said the US had seen a small dip in its third wave, but it was too early to be certain this signified an actual moderation in the wave itself, and the path of Covid-19 remained uncertain, both in the US and overall globally, with further waves expected over next year too.
“The Fed has sounded caution on normalising monetary policy in the face of this uncertainty, which has benefited the rand and some other risk-on trades but has also caused some volatility, with focus on US economic indicators for when QE (quantitative easing) tapering will begin,” she said.
Bishop said, worryingly, scientists pointed not only to fourth and additional waves of Covid-19 globally running through next year, but also of the risk of variants significantly immune to current vaccines, and even these mutations forming in the delta variant.
Consequently, it remained highly uncertain still what the path would be for Covid-19 with the Fed cognisant of this, taking a balanced approach to providing monetary policy support to the economy – but also a longer-term view, she said.
BUSINESS REPORT ONLINE