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Standard Bank Group
South Africa FX 18 July 2022

FX Monthly Chart Book

Shireen Darmalingam

  • The rand ended June on a weaker footing impacted by the prospects of the Fed hiking rates more aggressively while the ongoing war between Russia and Ukraine kept trading conditions very volatile. Talks of recession in the Eurozone, UK and US have also kept financial markets under strain. (Please see report Ramping up the dollar by Steven Barrow).
  • Locally, Eskom’s implementation of Stage 6 loadshedding following strike action has contributed to the recent weakness of the currency in June and July thus far. President Cyril Ramaphosa is expected to soon announce measures on how government is planning to deal with loadshedding concerns. Emergency procurement of new capacity, emergency maintenance and ramping up of maintenance are likely to form part of the plan. This could help alleviate some pressure on the currency, though the bulk of the recent weakness arguably stems from global rather than local factors. The rand’s recent weakness has also been impacted by a fall in commodity prices.
  • The recent Regulation 28 amendment, to increase the offshore investment allowance for the relevant retirement funds from 30% (outside of Africa) to 45% (all inclusive), could also weigh on the currency given the possible capital outflows.
  • We forecast the rand at R16.00/$ by end-2022 and R15.50/$ by end-2023. It should average R15.95/$ and R15.73/$ in those years respectively. We are more bullish than the consensus which is at R16.25/$ for end-2022 and less bullish than consensus for end-2023 (at R15.40/$).

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