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Johannesburg - The rand is set to rebound 5% against the dollar over the next year as it recoups losses many forecasters see as overdone, despite heightened concerns about the world economy, a Reuters poll showed on Wednesday.
The rand is the fifth-worst performer against the dollar this year, having lost 23% since January. Last month was its worst since the onset of the financial crisis in 2008.
A poll of 30 foreign exchange analysts and economists found that they expect the rand, which hit a 28-month low of R8.4950/$ last month, to strengthen to R7.70/$ in 12 months, up from the R8.10/$ it closed at on Tuesday.
Investors dumped risky assets such as the rand as the probability of another world recession increased and the eurozone debt crisis worsened.
But capital inflows into emerging markets contributed to the rand’s gains of over 10% in 2010 and some say the reasons for that shift are still convincing.
“We remain of the view that inflows into emerging markets, including South Africa, will resume once this bout of uncertainty abates. The structural reasons for these inflows seem set to continue,” Nema Ramkhelawan-Bhana, analyst at Rand Merchant Bank, wrote in a note.
Ultra loose monetary policy in the developed world is set to continue. US Federal Reserve chairperson Ben Bernanke said this week that the central bank was prepared to act further to support the world’s largest economy.
Volatility
But a path back to the R7.70/$ level for the rand is not a sure bet because volatility is expected to persist so long as Europe’s sovereign debt crisis remains unresolved.
Standard deviation - a measure of how far apart the forecasts are from each other - rose to 0.552 for the six-month forecast from 0.352 last month, suggesting forecasting the currency has become difficult.
“The risks for weakness over the next three to six months are significant, with almost inevitability of Greece going bust and Asia under fire,” said Anisha Arora, emerging market analyst at 4CAST.
“Similarly, given recent confidence shocks, there is sure to be a number of more months of poor data which will weigh on sentiment,” she said, seeing the rand at 8.30 in 12 months.
In the short term the rand could stage a brief correction, partly because its moves have been overdone and it was seen ending the next six months at 7.70 to the dollar.
“In the very short term, the rand is slightly oversold and needs to recover. (But) soft commodity prices will keep the rand under pressure in 2012,” said Leon Myburgh, strategist at Citi, who sees the rand at 8.50 to the dollar in 12 months.
Finance Minister Pravin Gordhan said although the government would like a more stable rand, it is at a loss about how to achieve that.
The rand is the fifth-worst performer against the dollar this year, having lost 23% since January. Last month was its worst since the onset of the financial crisis in 2008.
A poll of 30 foreign exchange analysts and economists found that they expect the rand, which hit a 28-month low of R8.4950/$ last month, to strengthen to R7.70/$ in 12 months, up from the R8.10/$ it closed at on Tuesday.
Investors dumped risky assets such as the rand as the probability of another world recession increased and the eurozone debt crisis worsened.
But capital inflows into emerging markets contributed to the rand’s gains of over 10% in 2010 and some say the reasons for that shift are still convincing.
“We remain of the view that inflows into emerging markets, including South Africa, will resume once this bout of uncertainty abates. The structural reasons for these inflows seem set to continue,” Nema Ramkhelawan-Bhana, analyst at Rand Merchant Bank, wrote in a note.
Ultra loose monetary policy in the developed world is set to continue. US Federal Reserve chairperson Ben Bernanke said this week that the central bank was prepared to act further to support the world’s largest economy.
Volatility
But a path back to the R7.70/$ level for the rand is not a sure bet because volatility is expected to persist so long as Europe’s sovereign debt crisis remains unresolved.
Standard deviation - a measure of how far apart the forecasts are from each other - rose to 0.552 for the six-month forecast from 0.352 last month, suggesting forecasting the currency has become difficult.
“The risks for weakness over the next three to six months are significant, with almost inevitability of Greece going bust and Asia under fire,” said Anisha Arora, emerging market analyst at 4CAST.
“Similarly, given recent confidence shocks, there is sure to be a number of more months of poor data which will weigh on sentiment,” she said, seeing the rand at 8.30 in 12 months.
In the short term the rand could stage a brief correction, partly because its moves have been overdone and it was seen ending the next six months at 7.70 to the dollar.
“In the very short term, the rand is slightly oversold and needs to recover. (But) soft commodity prices will keep the rand under pressure in 2012,” said Leon Myburgh, strategist at Citi, who sees the rand at 8.50 to the dollar in 12 months.
Finance Minister Pravin Gordhan said although the government would like a more stable rand, it is at a loss about how to achieve that.
