How Robust is the Rand?
The recent spate of adverse headlines surrounding the government-related behaviour of several major western companies has had little sustained impact on the Rand which continues to hover at around 13.2 per USD.
Some of this stability reflects the recent tailwinds of strengthening commodity prices and the economy exiting recession with a 0.6% q/q (2.5% saar) pickup in Q2.
However, the ongoing uncertain political backdrop - which is unlikely to abate until after the 2019 general election, underlying structural growth frictions, and our expectation of another interest rate cut by the SARB before the end of the year (despite the August pickup in headline inflation to 4.8% y/y it remains comfortably within the target band) suggest that the risks remain tilted to the downside. Look for the Rand to soften from its current 13.3 to around 13.6 by the end of the year.