We’ve become used to the rand being just about the most volatile currency in the world. However, 2014 is shaping up be the least volatile year for the rand since 1999, according to John Cairns, Currency Strategist at RMB.
“The range between the rand's highest and lowest points so far this year is only the 13th biggest of the major currencies," says Cairns. “It’s usually top of the log but, so far, the range has been just over R1. The rand's average range is around R2.65.”
A more stable rand is good for the economy as it gives businesses certainty.
“We believe the rand is undervalued,” says Cairns. “Exports are growing at a relatively decent pace while import growth has really slowed down. The balance of payments (i.e. difference between imports and exports) should be correcting.
“We expect the rand to strengthen to R10.50 to the US dollar, but there are lots of risk to this prediction,” admits Cairns. “It depends very much on what the US Fed has in store for us.”
Cairns believes the rand will strengthen. Currency Strategist at Barclays Africa Michael Keenan (sort of) agrees. Click here to learn more or here to learn why petrol will be much cheaper by Christmas if Cairns' and Keenan's forecasts pan out.
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