The rand’s value on the financial markets took a beating this week, falling against all of the major currencies on a broad basis.
Bureau for Economic Research (BER) said in a research note released on Friday (29 October) that this was likely owing to a confluence of factors that have put pressure on the local currency.
Stage 4 load-shedding, as well as the uncertainties surrounding the upcoming municipal election, are among the risks. The aggressive 150 basis point policy rate hike by Brazil earlier in the week may also have weighed on the rand, as it increased the interest rate disparity between South Africa and Brazil.”
The rand fell against the dollar again on Friday, tumbling to roughly R15.30/dollar before noon, down over 1% from the previous day.
While the initial 2021Q3 US GDP print came in lower than predicted, the BER noted that investors “seemed to shrug off” it, noting that “the foreign portion” contains more information about it.
“Instead, strong earnings reports from companies helped support the stock market. The local JSE traded higher through Thursday’s close along with the weaker rand, which enhanced the earnings expectations of local companies with offshore exposure.”
As part of a separate statement, investment bank BNP Paribas said this week that, according on its BEER+ model, the local currency’s fair value is R13.76, with the group projecting a climb to R14.05.
A more structural and long term view suggests that the trade surplus will normalize in the coming years, providing less support for the rand. The result is a drop in the value of the rand.
due to the related fiscal uncertainties, next year is out. Poor results in the ANC’s municipal elections could accelerate the decline by raising fiscal concerns.