Bumpy Road ahead for the rand, experts warn

South Africa’s rand will be increasingly hard to predict this coming year, says financial services company PwC.

PwC, a leading financial services company, has highlighted the increasing unpredictability of South Africa’s rand in the upcoming year. According to their latest economic outlook report, the currency’s volatility poses challenges in short-term predictions.

In 2022, the rand ranked as the tenth-most volatile and 18th-most traded currency out of 180 globally. Its value fluctuated due to various international and domestic factors, a trend expected to persist in 2023. PwC noted that political uncertainty, such as concerns over President Cyril Ramaphosa’s fate, led to significant trading activities, causing the rand to weaken in December.

Recent developments, including signals from the US Federal Reserve about progress in combating inflation, influenced the rand’s performance. The currency experienced fluctuations amid a power crisis, marked by daily outages in 2023, making it one of the worst-performing emerging market currencies.

PwC’s initial 2022 forecast of the rand averaging R15.28/$ was surpassed, with the currency averaging a weaker R16.37/$. Global factors like the Russia-Ukraine conflict and the energy crisis impacted markets, particularly emerging economies.
PwC identified potential global influencers on the rand’s valuation in 2023, including political divisions in the US, high inflation triggering civil unrest, and the rise of artificial intelligence disrupting markets and social trust.

The graph below shows the ZAR/USF and volatility index between 2019 and the end of 2022:

The graph below shows the ZAR/USD Exchange Rate Currently as of 03 November 2023.

The table below illustrates the most trade currencies across the globe as of the latest data from the Bank of International Settlements (BIS):

On the domestic front, PwC emphasized that local policy developments (or lack thereof) could significantly impact rand movements. Load shedding, a recurring challenge in South Africa, hindered GDP growth and business operations, affecting the rand’s stability. Despite the typical strength observed in January, the ongoing load shedding crisis led to a loss of investor confidence, further weakening the rand.

Source of Info: BussinesTech
_{Article Amended on 3 Nov 2023.}