Could the Rand hit R25 to the Dollar?

Economists warn that poor governance could steer the rand to a new low, and the rand could hit R25 to the dollar.

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COULD THE RAND HIT R25 TO THE DOLLAR?

Investec Chief Economist Annabel Bishop said the rand trod water against the US dollar last week, as markets continued to worry about the deterioration in SA state finances.

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“The rand reached R18.73/USD, R20.15/EUR and R23.44/GBP last week, as some worries over a global recession eased. Additionally, the more important of the US CPI inflation (core) for August came in in line with expectations, supporting the rand.”Bishop said.

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THE DETERIORATION OF SA STATE FINANCES IS WORRISOME

Bishop added that the US CPI inflation did come out higher than expected, at 3.7% y/y versus 3.6% y/y, and 3.2% y/y previously, but the core CPI (excluding food and energy) inflation rate was in line with expectations, at 4.3% y/y, down from 4.7% y/y, which helped sentiment.

“Looking forward, this week sees the US and SA’s Central Banks meet on their respective interest rate decisions, with the US still expected to see the Fed leave US interest rates unchanged this week, and cut interest rates in 2024.”

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WHAT IS EXPECTED?

She furthermore said a more dovish Fed than expected would likely cause some US dollar weakness and so rand strength against the US dollar, with the opposite on a more hawkish US monetary policy tone, while SA’s MPC is also expected to keep rates unchanged.

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