South Africa’s rand will strengthen slightly against the dollar over the next year, having passed the worst of its depreciation since the US Federal Reserve first hinted at cutting back on monetary stimulus, a Reuters poll showed on Wednesday (4 September).
But the threat of more strikes in the country’s troubled mining sector could mean the currency weakens further in the short term as gold miners strike for higher pay, inflicting more damage on the industry.
The poll of 31 analysts suggests the rand is set to be relatively steady in the coming six months, seen slightly firmer at 10.20 against the greenback from current levels of 10.2590. In 12 months, the rand is forecast to firm to 10.00 per dollar.
Emerging market currencies have been in a rout since the Fed hinted that it will begin tapering its monetary stimulus, with the rand losing over a fifth of its value since the start of the year, but analysts say that the sell-off is already priced in.
“Much of the volatility related to Fed quantitative easing tapering in September has already occurred,” said Christopher Shiells of Informa Global Markets.
Most are expecting the Fed to begin tapering its quantitative easing programme at its Sept. 17-18 policy meeting provided US payroll numbers due on Friday don’t disappoint.
“And after the September Fed meeting, once the decision on tapering is known, the rand will settle down a touch, but remain at recent weak levels due to ongoing strike action,” he added.
A strike began on Tuesday in gold mines with some workers failing to go underground for the evening shift, despite an appeal by President Jacob Zuma for a solution to avert a stoppage that will hurt Africa’s largest economy.
The planned shutdown in the gold sector is expected to cost Africa’s biggest economy more than $35 million a day in lost output, economists say.
A Reuters consensus of economists last month put economic growth at a relatively low 2.2% this year, which would be bad for the rand.
The main mining union said on Wednesday it had offered to lower its wage increase demands to gold companies, raising hopes of a compromise that could limit the duration of a strike that has already hit producers.
A weaker rand may also be helping exporters. The Purchasing Managers’ Index rose in August to its highest in six years on improving demand.