The rand has seen consistent gains against the major currencies over the last two weeks, and has now appreciated to levels around R16.80 after trading near its all-time R19-lows in early April.<\/p>\n
“For a long time, we have held that the rand is too weak and should be strengthening,” said Dr. Francois Stofberg, senior economist at the Efficient Group.<\/p>\n
“Using a measure of the average undervaluation of the rand\u2019s purchasing power parity (PPP), and considering all the negative sentiment towards South Africa, directly and indirectly, a ‘normal’ closer to what we would expect would probably be around R16.50<\/strong>,” he said.<\/p>\n Stofberg added that the rand could see further appreciation if the government focuses on a number of ‘pro-business’ moves.<\/p>\n “If South Africa could do a couple of things better – including prudent fiscal management and\/or a pro-business ideology – the rand could even appreciate to R15.50<\/strong>.<\/p>\n “Nevertheless, the recent moves in the rand were caused more by external factors, than by internal ones.”<\/p>\n This was echoed by Bianca Botes, executive director at Peregrine Treasury Solutions, who said that the rand is being boosted by dollar weakness.<\/p>\n “There is little change in the market as the dollar continues to lose ground, closing in on 3-month lows as the relief rally bolsters risk appetite and commodity-driven currencies,” she said.<\/p>\n “The rand is basking in the dollar weakness, reaching fresh highs in the overnight session and starting the day at R16.72.”<\/p>\n The end of the run?\u00a0<\/strong><\/p>\n Upgraded forecasts from Goldman Sachs suggest the South African unit may already have peaked after a three-week rally against the dollar and pound.<\/p>\n “Since late April, the rand has led a broader emerging marketFX rally, appreciating by more than 10% versus the dollar,” said Zach Pandl, global co-head of foreign exchange strategy at Goldman Sachs<\/a><\/strong>.<\/p>\n “But, as we have long observed, South Africa\u2019s longer-run combination of weak growth and current account dynamics have underpinned a multi-year trend of FX weakening,” he said.<\/p>\n Local traders are more bullish on the currency, however.<\/p>\n With no significant data due locally until Thursday, investors\u2019 focus is now on the US central bank\u2019s two-day meeting, starting later in the day, for any forward guidance as the economy gradually starts showing signs of recovery, Reuters<\/a> <\/strong>reports.<\/p>\n “It could very well come down to Wednesday and what the Fed see as a path forward,\u201d said Standard Bank chief trader Warrick Butler in a research note.<\/p>\n “More easing in terms of long-term low\/zero interest rates and continued support for the economy and this strong support area in the rand of R16.50\/65 could well give way and open another floodgate move back to R15.50<\/strong>.”<\/p>\n The rand was trading at the following levels against the major currencies at 13h50 on Tuesday (9 June):<\/p>\n