Johannesburg - Global economic uncertainty is set to keep
the rand trading in a narrow range over the next 12 months, although the
prospect of rising interest rates could lend some support to the currency, a
monthly Reuters poll showed on Wednesday.
The poll forecast a steady path for the rand against the
dollar for a second straight month, with the median prediction from 34 analysts
and strategists showing the currency firming to R7.70 in one month, R7.65 in
six months and R7.60 at the end of March next year.
The rand was at R7.78 to the dollar earlier on Wednesday.
"Working against the rand is what could be termed the
next stage in the currency war, a tightening of monetary conditions in the US
and a slowdown in the Chinese economy, as well as the eurozone slowdown,” said
Christopher Shiells, an emerging market analyst at Informa Global Markets in
London.
"However, South African yields remain attractive to
international investors so capital inflows will continue for the medium
term."
As the United States economy improves, the Federal Reserve
has backed away from providing more monetary stimulus, which has given the
dollar support against the rand.
The crisis in the eurozone has also weighed on the local
currency, due to South Africa's reliance on European trade. Investors are also
fearful that China's slowing economic growth could lessen the demand for South
Africa's commodities.
The rand has gained about 5% from the start of the year, but
has swung with how much risk global investors are willing to pile on, at times
being the best or worst performer of emerging markets depending on how the
day's news is interpreted.
"We are in a risk-on, risk-off environment, but to base
our forecasts, we take the view that there is no value in buying or selling the
rand because the overall macroeconomic story and the story in South Africa is
not supportive," said Murat Toprak, emerging markets strategist at HSBC in
London.
The Reserve Bank has kept the repo rate at a historical low
of 5.5% after cutting it by 650 basis points in two years to November 2010, in
an effort to boost a sluggish economic recovery.
The latest Reuters Econometer expects rates to rise 100
basis points by the end of next year, starting in the first quarter of next
year.
"We have no change in policy rates for the entire year, we do not expect any hike for entire year, so the overall combination is supportive for the rand," said Toprak.