The rand remains vulnerable in the short term and could test 8 to the US $ later this week. The ZAR has fallen to levels last seen a year ago on perceptions that the global economy is slowing at a faster rate than initially feared.
South Africa’s MPC meets on September 22 to discuss SA interest rates. Even so, early indications in the bond markets indicate ‘no change’ in interest rate expectations.
Two external price shocks for the ZAR require careful consideration. Given SA’s dependence on the euro for 45% of its exported product, any weakness in that currency has serious implications for SA’s growth prospects. The unwinding of leveraged assets, of which the ZAR is the most leveraged, will keep the rand under pressure. To date, the ZAR has been a favourite haven for the so-called carry-trade. That might change in the next day or two with some interesting consequences for rand-hedge equity.