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The SA Daily 23 April 2019

Rand seen less rocky in H1:19

Shireen Darmalingam

  • The rand, as most emerging market currencies, has borne the brunt of ruinous politics globally. Last year in H2:18, the rand averaged ZAR14.18. It has since recovered somewhat but remains weaker than our forecast of R13.74/$ by June this year. This is also weaker than the rand’s H1:18 average of R12.30/$. Admittedly, rand gains in H1 last year were spurred by so-called Ramaphoria.
  • We nevertheless expect the rand to firm to R13.40/$ by year-end 2019, premised on constructive reforms after the SA national elections in May. We still see the rand as undervalued; and, it will remain vulnerable due to a mix of risk factors — being pre-election uncertainty, the threat of power cuts, and global headwinds and risks.
  • As we foresee the ANC retaining a sufficient majority in the elections, President Ramaphosa should be able to drive the promised economic reforms — which should be rand-supportive. However, the breadth, and speed of implementation, of this reform agenda remain uncertain.
  • In H1:19, global growth concerns will keep the rand constrained. The IMF recently downwardly revised global growth forecasts to a lowest since 2009, to 3.3% in 2019, from 3.5%. This revision has been ascribed to the gloomier outlook for most developed economies as well as higher tariffs weighing on global trade. Still, in H2:19, more stable global growth should prove rand-supportive.

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