{"id":719540,"date":"2023-09-19T10:38:00","date_gmt":"2023-09-19T08:38:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=719540"},"modified":"2023-09-19T10:56:50","modified_gmt":"2023-09-19T08:56:50","slug":"the-rand-should-be-at-r15-00-heres-why-its-not","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/719540\/the-rand-should-be-at-r15-00-heres-why-its-not\/","title":{"rendered":"The rand should be at R15.00\/$ – here’s why it’s not"},"content":{"rendered":"\n

The rand is currently undervalued, but the currency will likely only start strengthening from next year. <\/p>\n\n\n\n

Investec Chief Economist Annabel Bishop said that South Africa’s fiscal deficit of nearly R145 billion sent shockwaves through the market last week, with many concerned about the outlook of the government’s finances, causing the rand to hit R19.75\/$. <\/p>\n\n\n\n

In addition, strong US Institute for Supply Management (ISM) employment numbers – the index growing from 50.7 to 54.7 – created further worries in the Fed, which has indicated that US labour market weakness is needed to tame inflation. <\/p>\n\n\n\n

The ISM prices paid data also rose higher than expected – 58.9 versus 56.8 previously – fueling corners of the stickiness of inflation, especially on the production side. <\/p>\n\n\n\n

Unit labour costs also grew from 1.6% to 2.2%, exacerbating concerns regarding the relatively high inflation levels in the US compared to previous years.<\/p>\n\n\n\n

This data from the US further weakened the rand<\/strong>, with the Fed’s maintaining its hawkish tone over interest rates. <\/p>\n\n\n\n

China’s PMI also weakened, with the slowdown in the second-largest economy in the world<\/strong> having a disastrous impact on the commodity-linked rand. <\/p>\n\n\n\n

Despite a slight improvement in the last few days, the rand still remains close to R19.00\/$ at R18.96\/$. <\/p>\n\n\n

\n
\"\"<\/a>
ZAR\/USD exchange over the last 12 months<\/figcaption><\/figure><\/div>\n\n\n

This week<\/strong><\/p>\n\n\n\n

Several central banks around the world will make announcements on interest rates later this week, with the US Fed and the South African Reserve Bank expected to keep them where they are. <\/p>\n\n\n\n

However, there is still a belief that the US could hike rates again this year<\/strong>, which will hurt emerging market currencies like the rand. <\/p>\n\n\n\n

“Markets will be watching the slew of interest rate decision meetings to glean the emerging trend in monetary policy tones, with Central Bankers overall likely to err on the side of hawkishness, instead of dovishness to quell inflation expectations,” Investec said. <\/p>\n\n\n\n

“The Fed is expected to at least pause in its interest rate hike cycle this month, and the risk of further hikes this year is one of the key reasons keeping the rand weak.” <\/p>\n\n\n\n

“An unexpected US interest rate hike this week would most likely cause rand weakness.”<\/p>\n\n\n\n

Relief<\/strong> on the table<\/strong><\/p>\n\n\n\n

Crucially, Investec noted that the rand is currently heavily oversold, and its fair value is closer to R15.00\/USD. <\/strong><\/p>\n\n\n\n

The rand, like other emerging currencies, will likely strengthen next year<\/strong> as the US starts cutting interest rates. <\/p>\n\n\n\n

However, government-determined factors will still have a massive say on the rand’s performance. <\/p>\n\n\n\n

For instance, during this month, there has been a rise in commodity prices, especially metals and industrial prices, which should have strengthened the rand. But failures at Eskom and Transnet have dampened this benefit. <\/p>\n\n\n\n

\n\n\n\n

Read: Treasury\u2019s desperate plan to keep South Africa from the edge<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa’s currency is undervalued – but South Africans should not expect it to show its true value in the near term.<\/p>\n","protected":false},"author":95,"featured_media":682065,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26,1498],"class_list":["post-719540","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline","tag-investec"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/719540","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\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=719540"}],"version-history":[{"count":9,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/719540\/revisions"}],"predecessor-version":[{"id":719572,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/719540\/revisions\/719572"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/682065"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=719540"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=719540"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=719540"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}