Johannesburg - The rand closing on Friday to R12.65 to the US dollar has raised expectation of further declines which could lead the currency to R13.94 by 2018.
Speculation on Friday was that the rand could end the current year at R13 to the dollar, a distinct possibility as the currency is swayed by depressed commodity prices, events in the euro zone, weak figures out of China and pressure on emerging markets. It faces an uncertain fate this week with a slew of data expected, including the US Fed’s rate decision and second quarter gross domestic product figures that might put a squeeze on the rand and other emerging market currencies.
Ricardo da Camara of ETM Analytics said it was hard to tell when the currency would stabilise from its present plunge, but he was certain that R12.70 to the dollar was a high possibility.
Iquad Analytics portfolio manager Danie Strijdom said the rand had been declining since 2005/6 and had picked up pace from 2011. He said banks were forecasting the currency at R14 to the dollar in the next two years, even as the Monetary Policy Committee tried to keep inflation in check.
Strijdom said the rand’s fall could only be arrested with better fiscal management and if improvements on labour laws were effected. “If the deficit does not change, if the labour laws are not changed and sentiment does not change, investors are unlikely to prop up the rand with foreign inflows,” he said.
Business Report