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Standard Bank Group
South Africa FX 13 January 2023

FX Monthly Chart Book

Shireen Darmalingam

  • The rand will likely remain volatile in 2023 due to several global and local headwinds, some of which should however fade as the year progresses. Global growth is expected to trough early in 2023, with some countries then starting to partly unwind the aggressive monetary policy tightening of 2022. This, along with our G10 strategist’s bearish dollar view, are key drivers of our rand exchange rate forecasts.
  • The rand has strengthened in the first two weeks of this year despite unprecedented domestic loadshedding. Eskom has implemented Stage 6 loadshedding due to severe constraints from generating units breaking down. The ongoing uncertainty around electricity supply will likely keep the rand under strain, and there’s probably still some additional risk premium for the political risk underscored by December’s Phala-Phala events. These headwinds are, however, counteracted by relatively elevated terms of trade (albeit far below their recent peak), although we see this drifting sideways in 2023, below its recent peak.
  • The rand is currently slightly undervalued, and weaker than our fair value estimate. We see the rand ending this year at R16.15/$ and averaging R16.55/$. It is expected to average R18.30/€ and R20.45/£ in 2023.

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