FX Monthly Chart Book
- The adverse impact the Omicron variant detected late last year seems to be easing with the currency market having gotten off to a good start this year. The rand gained ground against the majors in January despite concerns of elevated inflation and expectations of rate increases. The rand was up 2,9% against the dollar in January, up 3,5% against the euro and 3,2% against the pound. The rand traded in a range of R15.06/$ to R16.09/$ in January and ended the month at R15.39/$.
- The global economic backdrop is still expected to remain relatively rand supportive with the ongoing global search for yield, still reasonably strong forecast growth, still relatively easy financing conditions and possible dollar weakness. However, the tailwinds for the SA currency and economy are generally weaker than last year. The withdrawal of stimulus by major central banks at a relatively faster rate than previously expected could see the currency remaining quite volatile.
- We still expect some volatility given fluid Covid developments. The detection of the Omicron subvariant poses risks to increased infection in SA. However, the subvariant does not seem to cause more severe disease and could have a limited impact on growth in the event of infection flare-ups.
- We see the rand ending the year at R15.00/$ and R15.15/$ by the end of 2023. It is expected to average R15.27/$ and R15.08/$. We are more bullish than consensus (at R15.80/$ and R15.77/$ for end-2022 and end-2023 respectively).