Rand to remain stable as Gordhan and junk status already priced in
South Africa’s rand is expected to remain relatively stable against the dollar for the rest of 2017 as the impact of finance minister Pravin Gordhan’s shock dismissal and a credit rating cut to “junk” is already priced in, according to a new poll by Reuters.
As a result the rand is expected to weaken from a current R13.74 per dollar to R14.00 within the next 12 months, and is even expected to firm to R13.50 to the dollar within the coming six months noted the report.
“One has to remember that Nene-gate was a total shock. It came out of the blue,” said Hugo Pienaar, economist at the Bureau for Economic Research. “Whereas what has happened now, both the reshuffle and the ratings downgrade were not totally unexpected; to an extent they have been discounted.”
This was corroborated by two earlier Reuters polls which found that most analysts expected a ratings downgrade to junk, most likely by S&P, by the end of 2016 and the fact that the rand fell substantially less than after Nene’s dismissal in December 2015.
However, Pienaar warned the market could take different view if other agencies also downgrade the country’s ratings. This warning follows confirmation by ratings agency Moody’s, who said it is in the process of reviewing its rating earlier this week.
Read: How long it could take South Africa to climb out of junk status
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