Publications
Partners
New York - The rand lost almost a fifth of its value last year due to its sticky current account and domestic labour strife and is expected to shed around 3% in the next 12 months to trade at R11.02/$, according to a Reuters poll.
In addition to the weakening rand, the poll also sees Turkey's lira and Russia's rouble to lose more ground as it is caught in the crosshairs of emerging market capital outflows and an ascendant US dollar.
Investors and speculators have sold off emerging market assets since the US Federal Reserve made clear late last year that it would gradually taper its massive monthly bond purchase programme, which up until then had been propping them up.
As it became more clear the Fed intended to wind down the programme by year-end, emerging market currencies got hit hard, although there has been a let-up in the selling over the last few weeks.
"The key concern for the rand is this current account deficit because even though the currency has been very weak already, the current account has not shown any significant signs of improvement," said Barclays Africa analyst Mike Keenan.
South Africa's current account deficit widened in the third quarter to a five-year high, increasing the economy's vulnerability to external shocks, while trade figures for January reported last week point to a further deterioration.
"We think the rand will start to weaken soon because we have had a bit of profit-taking by the rand bears, but the positioning is now well set for a renewed bout of weakness," he added.
The Turkish lira, which has lost about a fifth of its value over the past year is expected to get hit by a political scandal that has gripped the government in Ankara.
A graft probe which led to the resignation of three ministers in December 2013 and shook Turkish Prime Minister Tayyip Erdogan's government unnerved investors further, particularly with elections looming in March and August.
In January, the Turkish central bank raised all of its key interest rates in a dramatic move in an emergency policy meeting to defend a crumbling currency that is among the most vulnerable to another sell-off.
"We remain bearish on the longer term given our outlook on US yields, emerging market growth and the risk that the important election year in Turkey brings a renewed pressure once again later in the year," Anezka Christovova, FX strategist at Credit Suisse said.
The lira, which touched a record low of 2.39 in January and has fallen around 3% so far this year, is expected to trade at 2.25/$ in a month, 2.27/$ in three and settle at 2.25/$ in a year.
The Russian rouble, which has fallen nearly 10% this year and hit a record low on Monday, will also fall a bit more, but not very much, so far shrugging off the biggest escalation in tensions between Russia and the West since the Cold War.
A measure of calm had returned to global markets on Wednesday, after the Russian stock market plunged more than 10% on Monday. The United States and Russia were set to hold talks on easing East-West tension in Ukraine.
But all three currencies remained top picks by global currency strategists as most vulnerable to another emerging market sell-off.
Strategists in a poll taken over the last 48 hours predict the rouble will recover a little to 35.50/$ in a month, 35.00/$ in three months before weakening to 36.17/% in a year's time.
But when asked how low it could trade in the near term, the consensus from nine strategists put it at 37.00/%.
"If you look at the rouble forecast, a lot of it is dollar strength. It's not like I'm predicting isolated rouble panic but I think the rouble is faced with challenges," said John Hardy, head of FX strategy at Saxo Bank.
"The economy is underperforming and I think they (Russia) would like to see the rouble weaker anyway...in terms of making Russia competitive."
In addition to the weakening rand, the poll also sees Turkey's lira and Russia's rouble to lose more ground as it is caught in the crosshairs of emerging market capital outflows and an ascendant US dollar.
Investors and speculators have sold off emerging market assets since the US Federal Reserve made clear late last year that it would gradually taper its massive monthly bond purchase programme, which up until then had been propping them up.
As it became more clear the Fed intended to wind down the programme by year-end, emerging market currencies got hit hard, although there has been a let-up in the selling over the last few weeks.
"The key concern for the rand is this current account deficit because even though the currency has been very weak already, the current account has not shown any significant signs of improvement," said Barclays Africa analyst Mike Keenan.
South Africa's current account deficit widened in the third quarter to a five-year high, increasing the economy's vulnerability to external shocks, while trade figures for January reported last week point to a further deterioration.
"We think the rand will start to weaken soon because we have had a bit of profit-taking by the rand bears, but the positioning is now well set for a renewed bout of weakness," he added.
The Turkish lira, which has lost about a fifth of its value over the past year is expected to get hit by a political scandal that has gripped the government in Ankara.
A graft probe which led to the resignation of three ministers in December 2013 and shook Turkish Prime Minister Tayyip Erdogan's government unnerved investors further, particularly with elections looming in March and August.
In January, the Turkish central bank raised all of its key interest rates in a dramatic move in an emergency policy meeting to defend a crumbling currency that is among the most vulnerable to another sell-off.
"We remain bearish on the longer term given our outlook on US yields, emerging market growth and the risk that the important election year in Turkey brings a renewed pressure once again later in the year," Anezka Christovova, FX strategist at Credit Suisse said.
The lira, which touched a record low of 2.39 in January and has fallen around 3% so far this year, is expected to trade at 2.25/$ in a month, 2.27/$ in three and settle at 2.25/$ in a year.
The Russian rouble, which has fallen nearly 10% this year and hit a record low on Monday, will also fall a bit more, but not very much, so far shrugging off the biggest escalation in tensions between Russia and the West since the Cold War.
A measure of calm had returned to global markets on Wednesday, after the Russian stock market plunged more than 10% on Monday. The United States and Russia were set to hold talks on easing East-West tension in Ukraine.
But all three currencies remained top picks by global currency strategists as most vulnerable to another emerging market sell-off.
Strategists in a poll taken over the last 48 hours predict the rouble will recover a little to 35.50/$ in a month, 35.00/$ in three months before weakening to 36.17/% in a year's time.
But when asked how low it could trade in the near term, the consensus from nine strategists put it at 37.00/%.
"If you look at the rouble forecast, a lot of it is dollar strength. It's not like I'm predicting isolated rouble panic but I think the rouble is faced with challenges," said John Hardy, head of FX strategy at Saxo Bank.
"The economy is underperforming and I think they (Russia) would like to see the rouble weaker anyway...in terms of making Russia competitive."
