{"id":259421,"date":"2018-07-19T08:28:13","date_gmt":"2018-07-19T06:28:13","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=259421"},"modified":"2018-07-19T08:28:13","modified_gmt":"2018-07-19T06:28:13","slug":"4-reasons-to-be-upbeat-about-the-rand","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/259421\/4-reasons-to-be-upbeat-about-the-rand\/","title":{"rendered":"4 reasons to be upbeat about the rand"},"content":{"rendered":"

The tide may have turned for South Africa\u2019s battered rand.<\/p>\n

The currency slumped 14% in the second quarter, its worst three-month period in more than six years, amid an emerging-market sell-off sparked by rising US rates and escalating trade tensions.<\/p>\n

It didn\u2019t help that South Africa\u2019s economy is struggling to emerge from a contraction, leaving the central little room for policy tightening. And the euphoria that followed Cyril Ramaphosa\u2019s election as president in February faded as he struggled to implement his reform agenda while appeasing populist elements in his own party.<\/p>\n

Still, the rand has climbed 3.4% since the beginning of July, the best performance among developing-nation peers after Argentina and Mexico\u2019s pesos, even as the trade war between the US and China escalated and the Federal Reserve signalled that its tightening path is on track.<\/p>\n

“The big falls are behind us,” said John Ashbourne, a London-based Africa economist at Capital Economics.<\/p>\n

“They were partially due to general, EM-wide factors but also reflected the rand finding a more sustainable level following the unsustainable rally prompted by hopes that political change would improve the economic situation. We always thought that this optimism went a bit too far.”<\/p>\n

Capital Economics forecasts the rand at R13.80 per dollar by the end of the year, a 3.4% decline from about R13.34 on Wednesday.<\/p>\n

These four charts show why there\u2019s reason for optimism about the rand:<\/p>\n

Risk Reversals<\/strong><\/p>\n

\"\"<\/a><\/p>\n

Traders have cut bearish bets on the rand. The premium of options to sell the currency over those to buy it in the next three months, known as the 25-Delta risk reversal, fell to its lowest level since May 17 on Wednesday. Options volatility has also declined as traders anticipate the currency\u2019s price swings moderating.<\/p>\n

Moving Average<\/strong><\/p>\n

\"\"<\/a><\/p>\n

The rand is taking a stab at moving below its 50-day moving average for the first time since November 2017. Last time it did so, it gained about 13% against the dollar in four months. When the inverse happened in April, the rand sold off heavily.<\/p>\n

Bond Buyers<\/strong><\/p>\n

\"\"<\/a><\/p>\n

After a record sell-off in the second quarter, which spanned 11 straight weeks of outflows, foreign investors are regaining their appetite for South African bonds. That tide turned last week, and continued for the first two days of this one, data compiled by the Johannesburg Stock Exchange and Bloomberg show.<\/p>\n

Average daily outflows dwindled to 300 million rand ($23 million) this month, from 1.5 billion rand in June.<\/p>\n

Credit Risk<\/strong><\/p>\n

\"\"<\/a><\/p>\n

With the immediate risk of a full blown trade war between Washington and Beijing off the table for now, the cost of insuring South Africa\u2019s debt against default in five years has dropped nine out of the past 13 trading days. Credit-default swaps are down 32 basis points to 184, well below those of Turkey and Brazil, from a 20-month high reached on July 2.<\/p>\n

\n

Read:\u00a0The rand has climbed more than 3% in July<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The tide may have turned for South Africa\u2019s battered rand<\/p>\n","protected":false},"author":59,"featured_media":114832,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-259421","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/259421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=259421"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/259421\/revisions"}],"predecessor-version":[{"id":259437,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/259421\/revisions\/259437"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/114832"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=259421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=259421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=259421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}