JOHANNESBURG - The South African rand is likely to weaken against major currencies this year, according to several currency experts.
The local currency was likely to stay within the R12-R13 to the US dollar range this year if there are supportive government policies, a lift in commodity prices and a stable or weaker US dollar, Ashburton Investments portfolio manager Wayne McCurrie said yesterday.
At 2.18pm yesterday, the rand was R12.46 to the dollar. By 5pm the rand was bid at R12.45.
The rand has been responsive to the leadership changes in the ruling ANC on the back of positive sentiment after Cyril Ramaphosa took over from Jacob Zuma last month.
McCurrie said the rand was a structurally weak currency “and has been for decades and will remain so for decades to come. It is not as though the underlying characteristics of the rand have changed because of ANC leadership changes.”
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He said, at current levels, the rand was at fair value.
“Between R12 and R13 to the US dollar is probably fair,” he said. “To stay at such, the currency needed a number of factors to work in its favour,” he said. These included the government taking steps to deal with the state-owned companies and managing the budget deficit. McCurrie said, given that South Africa was a commodity exporter, stronger commodity prices would also work in the rand’s favour.
“Finally, the dollar is likely to remain either stable or weaker this year,” he said. Beyond this year, the rand was likely to weaken further, he said. “Remember it’s a structurally weak currency,” he said. However, the weakness would not be consistent every year, he added.
File picture: Philimon Bulawayo
Jameel Ahmad, FXTM Global Head of Currency Strategy and Market Research, said yesterday that while the rand endured a roller-coaster ride on Tuesday following unsubstantiated reports over Zuma, “some investors do hold negative views on the local note in the medium-longer term.
“This is partly because of the accelerated recovery in the currency late 2017, while others might suggest that the ongoing macro outlook for South Africa does not provide much of an incentive to hold purchasing positions on the rand, at current levels.
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“With the rand (currently) trading close to its strongest levels since mid-2015, I tend to agree with the above. “However, we shouldn’t discount the possibility that an ongoing weak sentiment towards the USD in 2018, or further inspired risk appetite from traders in the global stock markets could tempt investors to ‘purchase’ into higher-yielding currencies.”
BMI Research, which is part of Fitch Group, said yesterday that the rand would weaken to about R13.10 to the dollar this year, attributing the expected depreciation to politics and interest rates.
The company said the rand overreacted to Ramaphosa’s election last month.