From the ANC elections to the coronavirus – this chart shows what has hit the rand over the last year

Peregrine Treasury Solutions has published a graph showing the rand’s performance since president Cyril Ramaphosa’s first state of the nation address (SONA) in 2019.

The rand reached a best level of R13.24/dollar in February 2019, however, a series of local and international factors means that the currency is closer to R15.00/dollar a year later.

Positive factors which have influenced the currency over the last 12 months include:

  • A weakened dollar due to a dovish Federal Reserve;
  • Certainty around the ANC’s election win;
  • Moody’s decision to skip a credit review;
  • And a strong gold price.

However, the rand has faced increased negative sentiment over the last year as part of a wider target of emerging markets, uncertainty about the independence of the Reserve Bank, Donald Trump’s trade war, and the Wuhan coronavirus.

Where is the rand heading in 2020?

The rand gained 0.9% on Tuesday (11 February) as risk sentiment in the market improved, although fears around the Wuhan coronavirus are still being felt. The local unit extended its winning streak on Wednesday as a return of global demand for riskier assets offset more dismal local data, Reuters reported.

Economists at South Africans largest banks see the rand trading weaker in 2020 as the country faces the risk of a Moody’s downgrade.

Nedbank has a mid-year target of R16 against the dollar, adding that the local currency could weaken towards R17.00 before a recovery to around R15.00 as we head into 2021 and 2022.

This aligns with Absa’s views published in January, with the bank’s analysts predicting that the rand will likely to reach R15.16 against the dollar by the end of the first quarter, reaching R16.13 by year-end.

However, Jeff Schultz, senior economist at global bank BNP Paribas South Africa, is bullish on the local currency on the back global liquidity, which is supportive of high yielding currencies like the rand.

Speaking at a BNP Paribas quarterly economic update event at Melrose Arch in Johannesburg on Monday (10 January), Schultz said that he expects the rand to strengthen to R14.30 against the dollar by year end, and to R13.75 by the end of 2021.

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From the ANC elections to the coronavirus – this chart shows what has hit the rand over the last year