Johannesburg - The
rand is expected to firm more than 3% to R7.825/$ in 12 months, a Reuters
poll showed, but that is dependent on a solution to Europe's debt crisis and a
pickup in global growth this year.
The rand was one of the world's worst performing currencies
last year, losing about 22% against the dollar as investors spooked by a
spiralling crisis in Europe pulled out of riskier emerging markets.
The survey of 34 foreign exchange analysts and economists
forecast the rand would weaken against the dollar to R8.335 in 3 months from about R8.18 on Thursday, recover to R8.215 in six months and climb back to
R7.825 in a year.
The last survey had a more bullish strengthening trend for
the coming 12 months than the current survey, R8.1 in three months, R8.0 in six
months and R7.68 in 12 months.
“US dollar strength and rising risk aversion levels, on the
worsening of the sovereign debt crisis, has weakened our rand forecast,” said
Investec economist Annabel Bishop.
Analysts in the poll figured riskier assets would do better
in the second half of the year, and so the rand, but noted that a further
deterioration in the global macroeconomic outlook would easily change that.
“While the mining and manufacturing sectors should recover
from the weakness experienced in 2011, headwinds from the global macroeconomic
environment and rising cost pressures will restrain growth,” said John Cairns,
at Rand Merchant Bank.
Mining and manufacturing growth slowed sharply in October.
Total mining output contracted by 12.7% year-on-year (y/y) while growth in
manufacturing output slowed to 1.0% y/y in the same period.
The contraction in mining output reflected weakness in South
Africa's trading partners, with Europe the biggest partner.
The global backdrop is expected to determine where the rand
trades. Some noted that a further widening of the current account deficit may
restrain the rand's ability to recover.
“Worryingly, the bulk of the current account deficit is
financed by ’hot’ money inflows,” Royal Bank of Scotland said in a client note,
adding around $32bn has poured into the South African equity and bond markets
in the last two years.
With the latest eurozone purchasing managers’ indices suggesting a mild recession in the region, the prospect of falling exports and
possible capital outflows would weaken the rand.
That current account deficit widened to 3.8% of gross
domestic product in the third quarter from 2.9% in the second quarter, partly
due to large dividend payments to foreign investors.
The forecast for interest rates according to the latest
Reuters Econometer is for rates to stay on hold at 5.5% while inflation averages
5.97% for the year, offering no immediate incentive to invest in the bond