{"id":719794,"date":"2023-09-20T10:37:00","date_gmt":"2023-09-20T08:37:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=719794"},"modified":"2023-12-06T13:36:10","modified_gmt":"2023-12-06T11:36:10","slug":"the-rand-could-hit-r25-to-the-dollar-economists-warn","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/719794\/the-rand-could-hit-r25-to-the-dollar-economists-warn\/","title":{"rendered":"The rand could hit over R20 to the dollar, economists warn"},"content":{"rendered":"\n

Update: <\/strong>The figure from HSBC was misquoted as R25 to the dollar. The accurate figure is R20.50 to the dollar. The article has been updated to reflect this.<\/em><\/p>\n\n\n\n

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While positive global factors favour the rand moving forward, some economists warn that poor governance could neutralise any benefits and steer the rand to a new low against the US dollar in 2024. <\/p>\n\n\n\n

Over the past week, concerns over the outlook of South Africa\u2019s finances, the Fed maintaining its hawkish tone over interest rates, and China\u2019s PMI weakness put pressure on the rand, keeping it subdued at over R19\/$. <\/p>\n\n\n\n

According to Investec Chief Economist Annabel Bishop, strong US labour numbers and prices paid indicated that US labour market weakness is needed to tame inflation. At the same time, 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

While the US Fed is expected to keep interest rates unchanged this week, the abovementioned data has fueled a belief that the US could hike rates again this year, which will hurt emerging market currencies like the rand.<\/p>\n\n\n\n

\u201cThe 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,\u201d said Investec. <\/p>\n\n\n\n

Additionally, China\u2019s PMI also weakened, with the slowdown in the second-largest economy in the world having a disastrous impact on the commodity-linked rand.<\/p>\n\n\n\n

According to an economic note to clients by HSBC economists this week, the rand will likely soften to R19.50\/$ by year-end<\/strong> \u2013 driven mainly by cyclical factors such as power outages and high inflation.<\/p>\n\n\n\n

Despite this, Investec added that the rand is currently heavily oversold, and its fair value is closer to R15.00\/$. It said that the rand, like other emerging currencies, will likely strengthen next year as the US starts cutting interest rates.<\/p>\n\n\n\n

However, Investec and HSBC economists warn that government-determined factors will still have a massive say in the rand\u2019s performance.<\/p>\n\n\n\n

For example, invested noted that, 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

HSBC added that the rand is expected to decrease in value against the dollar due to a deteriorating fiscal situation and an expanding current account deficit. <\/strong>This could negatively affect importers and potentially cause an increase in prices, which is concerning as the Reserve Bank was making progress in curbing inflation, reported<\/a> Business Day.<\/p>\n\n\n\n

“We think global forces and domestic structural drivers are likely to dominate and push the currency to new record lows in the months ahead<\/strong>,\u201d said the report.<\/p>\n\n\n\n

According to HSBC’s forecasts, the rand could hit R20.50\/$ in 2024<\/strong> as structural factors \u2013 the worsening fiscal deficit and widening current account deficit \u2013 swap roles with cyclical factors, such as inflation and load shedding, to become the major drivers of the currency in the coming months.<\/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":"

Emerging market currencies are currently expected to strengthen next year – but government-determined factors could spoil things for the rand in a big way.<\/p>\n","protected":false},"author":10,"featured_media":704959,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[5368,1498,853],"class_list":["post-719794","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-hsbc","tag-investec","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/719794","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\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=719794"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/719794\/revisions"}],"predecessor-version":[{"id":720510,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/719794\/revisions\/720510"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/704959"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=719794"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=719794"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=719794"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}