During September the South African rand weakened sharply against the US dollar from 14.499 to 14.995. Economists at MUFG Bank expect the USD/ZAR to edge higher into year-end as ZAR is vulnerable to further weakness on back of global slowdown fears.
Sharply weaker rand
“The rand has been hit by building concerns over the global growth outlook. Market participants are becoming more fearful that supply constraints and the likely default of Evergrande will dampen the pace of the global recovery.”
“The rand has been undermined by the Fed’s more hawkish plans for a faster tightening of monetary policy. The Fed signalled that a QE taper announcement is likely in November, and the tapering process is likely to be brought to an end by around the middle of next year. It leaves open the door for the first rate hike by late next year.”
“We expect further rand weakness heading into year end in response to the more negative external environment. Therefore, we forecast USD/ZAR rising back towards the August high at 15.400 in Q4.”
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