JOHANNESBURG - There’s no place left to run for South African investors who want to diversify away from the country’s ailing economy -- and that may be good news for the rand, according to the top forecaster of the currency against the dollar.
South Africa increased limits on the amounts institutions may invest offshore by 5 percentage points in February, to 40 percent for fund managers and 30 percent for pension funds.
Most investors are at or close to those levels, providing crucial support for the rand at a time when emerging-market assets are under pressure from rising US rates, according to Mike Keenan, a Johannesburg-based strategist at Absa Group Ltd.
“That will cap the rand weakness,” said Keenan, who predicts the currency will end the year about 2.5 percent stronger at 14.25 per dollar. Absa was the most accurate forecaster of the rand versus the dollar in the third quarter, according to data compiled by Bloomberg.
The rand has slumped 19 percent since the beginning of April amid an emerging-market sell-off sparked by rising US rates and a stronger dollar, and fueled by crises from Turkey to Argentina.