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The SA Daily 10 April 2018

Rand approaching purchasing power parity

Shireen Darmalingam

  • The rand weakened intraday yesterday close to levels (around R12.15/$) last seen about a month ago. The rand opened at R12.09/$, and closed stronger at R12.05/$ yesterday. The trade-weighted dollar was stronger on the day. Most EM currencies weakened yesterday.
  • The rand is now relatively close to our estimated purchasing power parity (PPP) against the dollar and euro (using 2003 as base year), though still slightly stronger than PPP against some of the other currencies and, in our view, overvalued on a real trade-weighted basis.
  • We remain relatively constructive about the near-term outlook for the rand. We expect some rand depreciation in the medium term. At this stage, we forecast the rand around R12.50/$ by end-2018 and R12.70/$ by end-2019.

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