South Africa FX
04 December 2024
FX Monthly Chart Book
Shireen Darmalingam
- The rand lost ground against the dollar in November (-2.2%) due to a combination of local and global factors – from an intraday high of R18.39/$, it ended November at R18.05/$ (compared to R17.65/$ at the end of October). It was stronger against the euro (+0.4%) and weaker against the pound (-1.3%). It traded in a range of R17.27/$ – R18.39/$ in November. Most emerging market currencies lost ground against the dollar in November: the RUB, HUF, BRL, RON, and BGN were amongst the worst-performing currencies.
- The rand weakened in response to the re-election of Donald Trump as US president. The president elect has indicated tariff increases; this may weigh on SA growth. Donald Trump also recently warned the BRICS nations that he would need commitment from BRICS member countries that they would not lobby for a new BRICS currency as an alternative to the dollar. Further, he has threatened 100% tariffs in the event of what he would regard as non-compliance. And, that BRICS may not support another currency to replace the dollar without facing possible tariff repercussions. Some such measures include options such as export controls, currency manipulation charges, and levies on trade. Uncertainty in the lead-up to Donald Trump being sworn in (January next year) and tariff threats may see the rand remaining volatile.
- The rand gained following the announcement by the South African Reserve Bank (SARB) that it had cut the repo rate by a further 25 bps at the November MPC meeting. The MPC noted that reducing the level of restrictiveness of the policy rate is consistent with achieving the bank’s inflation target. The bank expects CPI to average 4.0% in 2025. The bank noted that temporary supply shocks will likely keep inflation below 4% through mid-2025. The bank also revised its GDP growth forecast up to 1.7% in 2025. The bank noted risks to the growth and inflation outlook as “balanced”.
- Our forecasts have always assumed ongoing traction with, and a positive impact from, policy reforms, and have therefore generally already been more constructive than the consensus. The rand is currently weaker than our fair-value estimate of R17.20/$ - R17.80/$.
- For 2025, we forecast the rand to average R17.54/$, R18.45/€, and R22.36/£; on a trade-weighted basis, currency gains will likely remain limited. We expect the rand to end 2025 at R17.40/$.
Read PDF