The rand returned to its strong level of R14.31\/$ on Wednesday after weakening a day earlier due to a firm dollar and growth concerns about South Africa being voiced.<\/p>\n
\u201cFor the first time in a while we saw some rand weakness,\u201d said Umkhulu Consulting\u2019s Adam Phillips on Wednesday.<\/p>\n
\u201cHaving traded below R14.30 yesterday at one stage, it touched R14.44, although there were quite a few exporters around securing rates above R14.40,\u201d he said.<\/p>\n
\u201cA strong dollar and a member of the International Monetary Fund (IMF) visiting South Africa were definitely factors affecting it.<\/p>\n
\u201cThe IMF has been vocal about growth opportunities in SA and the official voiced concerns about corruption and transparency in state-run companies.<\/p>\n
\u201cThis is something we all know, but when the IMF singles out concerns then we can be assured that the picture will be noted elsewhere.\u201d<\/p>\n
David Lipton, first deputy managing director of the IMF, said on Tuesday that \u201cSouth Africa is grappling with growth that is too slow to raise average living standards, which is deeply problematic when one-third of the working population is effectively excluded from the economy\u201d.<\/p>\n
\u201cSo far, there has been only limited progress on reforms to remedy that situation,\u201d he said. \u201cThe primary goal must be to re-energize growth by seeking inclusion and job creation.<\/p>\n
“Improved SOE (state-owned enterprise) governance and operations would send an important signal about accountability, including greater transparency in board appointments and remuneration of executives and board members,” he said.<\/p>\n
Phillips said the rand will once again move up to R14.40\/$ on Wednesday, as \u201cUS housing data was very good and the yen remains nervously weak as possible stimulus maybe around the corner\u201d.<\/p>\n
Wednesday\u2019s consumer price index (CPI) data could also impact the rand.<\/p>\n
Most analysts believe June\u2019s CPI \u2013 a measure of South Africa\u2019s inflation rate \u2013 will increase to 6.3% from 6.1% in May.<\/p>\n
However, RMB analyst Isaah Mhlanga said on Wednesday it would accelerate slightly to 6.2%, driven by increases in transport, housing and household contents.<\/p>\n
\u201cFood price inflation presents a risk that the print could be slightly higher than our estimate. We expect core CPI to have risen to 5.6% from 5.5%.\u201d<\/p>\n
Given concerns on growth, RMB expects the SA Reserve Bank\u2019s (Sarb’s) monetary policy committee (MPC) to keep the repo rate unchanged at 7% on Thursday.<\/p>\n
\u201cWe have been highlighting this view for some time now, and the improvement in the rand over the past month supports this view,\u201d said Mhlanga.<\/p>\n
This corresponds with what all the Bloomberg economists believe will occur on Thursday.<\/p>\n
\u201cThe market also expects the Sarb to remain on hold, thus we don\u2019t expect the rand to react as much,\u201d said Mhlanga.<\/p>\n
\u201cHowever, should the MPC reveal an increasing concern about inflation expectations in the wake of above-inflation wage demands, we cannot rule out the probability of one more rate hike before year-end.<\/p>\n
\u201cIn the absence of any surprise concerns from the Sarb, the rand will remain biased towards gaining, driven by global money searching for yield.\u201d<\/p>\n
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