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<\/a><\/p>\nMboweni will have to convince investors he has a credible plan to support an economy that\u00a0contracted\u00a0the most in nine decades last year, while also curbing growth in government debt, which Moody\u2019s Investors Service\u00a0says will\u00a0rise to more than 100% of gross domestic product over the next two years by Moody\u2019s Investors Service.<\/p>\n
The market also wants clarity on plans for debt-ridden state-owned companies such as Eskom Holdings SOC Ltd.<\/p>\n
The median estimate of analysts in a Bloomberg survey predicts the rand averaging 15.25 per dollar in the first quarter.<\/p>\n
Instead, it\u2019s strengthened below a long-term trend line at 14.65, and technical indicators suggest that the rally still has legs, according to Warrick Butler, the Johannesburg-based head of foreign-exchange trading at Standard Bank Group Ltd.<\/p>\n
\u201cFlows continue to support the rand via a strong export-led economy and international short-term investments into the bond market,\u201d Butler said in a note to clients. \u201cIt is very hard to see a different picture emerging.\u201d<\/p>\n
Bearish bets on the currency are declining, with the premium on options to sell the currency over those to buy it in the next month falling to its lowest level since mid-December.<\/p>\n
Implied volatility over the same window has also dropped to a two-month low, suggesting options traders see price swings moderating.<\/p>\n
The rand\u2019s status as an emerging-market proxy also saw it gain 14% in the fourth quarter, outperforming peers.<\/p>\n
But while the currency tends to outperform during risk-on bouts, it also tends to fall further when the mood changes, said Piotr Matys, a London-based emerging-market strategist at Rabobank. And that should be a warning for traders getting in on the rally.<\/p>\n
\u201cApart from capital outflows, weak economic fundamentals become a major burden for the rand, which causes substantial losses often to excessive levels,\u201d Matys said.<\/p>\n
\u201cAs long as the rand remains one of the most liquid emerging-market currencies and the Reserve Bank refrains from intervening and allows it to trade freely, the vicious cycle of spectacular rallies followed by substantial corrections is likely to continue.\u201d<\/p>\n
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