Morgan Stanley warns rand is most vulnerable to US yield rise | Fin24
  • Mboweni on State Capture

    The new finance minister has described state capture as a 'great public sector heist'

  • Kganyago on Populism

    The central bank head says SA must learn economic lessons from Venezuela and Zimbabwe.

  • Up in the Air

    Uber Air could see SA shoppers flying to malls via skyports, says a company executive.


Morgan Stanley warns rand is most vulnerable to US yield rise

Oct 04 2018 21:15
Robert Brand, Bloomberg

The rand is most vulnerable to the rise in US Treasury rates among its emerging-market peers, according to Morgan Stanley, which predicts further weakness for the battered currency as the country’s finances deteriorate.

The rand may decline about 6% to 15.50 per dollar in the run-up to the medium-term budget statement on October 24, Morgan Stanley strategists including Min Dai wrote in a report. Investors will watch the budget update for signs of fiscal slippage as sluggish economic growth curbs tax revenue.

“We remain convinced that South Africa will underperform into the medium-term budget update,” the strategists said. With foreign investors holding about 40% of the government’s rand-denominated bonds, “we believe that South Africa is the most vulnerable country in the current environment,” they wrote.

The rand slumped 2% on Wednesday as 10-year US Treasury yields climbed to the highest level since 2011, attracting money to the dollar and damping appetite for riskier assets.

The currency extended its decline on Thursday, weakening 0.5% to 14.7190 per dollar by 14:37 in Johannesburg. The probability of the rand hitting 15.50 by October 24 is 25%, according to Bloomberg’s forecast model.

Foreign investors have sold a net R55.7bn of South African bonds this year, according to JSE data, with the sell-off gathering momentum since the beginning of the second quarter.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

Follow Fin24 on Twitter and Facebook. encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

us  |  south africa  |  currencies  |  markets  |  rand


Company Snapshot


All eyes are on Tito Mboweni as he readies to deliver his maiden mini budget speech amid an ailing economy and eroded confidence.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth


Previous results · Suggest a vote