South Africans are likely to hear a wide range of forecasts about the rand this year, from R14/dollar to as high as R17/dollar – but R15/dollar is probably a truer reflection of the rand’s long-term value, says Dr Francois Stofberg, senior economist at the Efficient Group.
In a research note published on Wednesday (19 January), Stofberg said he would advise clients to take money offshore at any level below R15.50. “The rand can easily appreciate to levels closer to R14/dollar or depreciate to levels closer to R16/dollar. But, in our experience, these are only short-term swings.”
This was echoed by Investec chief economist Annabel Bishop, who says the rand is now consolidating below R15.50/dollar, but is likely to attempt R15.20/dollar this month in line with typical strengthening seen over the January period. The domestic currency so far averages R15.67/dollar for the first few weeks of this quarter, she said.
“Foreigners are positive overall on South African markets this year to date, purchasing R4.4 billion of SA bonds (net of sales), and R1.2 billion in equities (also on a net basis) in the middle of last week. Overall foreign inflows into South African portfolio assets this year so far total R3 billion.
“This has supported the rand’s strength, along with easing monetary policy in the world’s largest emerging market economy. China’s first cut in its key interest (one year loan) rate since April 2020, of 10bp, occurred as its economic growth slowed, lifting sentiment for emerging markets,” she said.
The R15/dollar mark also aligns with Nedbank’s ‘extreme peak’ forecasts for the first half of 2022, with the bank seeing ‘fair value’ between R14.80 and R15.50 to the dollar. In a research note on Thursday (20 January), Nedbank said that it expects further depreciation towards the latter half of the year.
“The South African Reserve Bank’s hawkish monetary policy language will assist in keeping the rand within our fair value range over the next three months,” it said.
“The current account is likely to flip to a deficit in Q4 2022, which will cause more persistent rand weakness. A more hawkish Fed would weigh on the currency through 2022.”
At 13h30 on Thursday (20 January), the rand was trading at the following levels against the major currencies:
- Dollar/Rand: R15.18 (-0.97%)
- Pound/Rand: R20.67 (-0.99%)
- Euro/Rand: R17.21 (-1.01%)