Goldman cheers as rand heads for best ever start to a year
The South African currency is heading for its biggest January gain against the dollar since Bloomberg started compiling the data in 1999. And with expected volatility near an eight-month low, traders are discounting local stumbling blocks in coming months, including a budget speech, ratings review and election.
The rand has been buoyed by a more dovish Federal Reserve and hopes for a trade deal between the US and China that would ease concerns about global growth. South Africa’s inflation has moderated, growth is set to pick up and the government is taking steps to eradicate corruption, consolidate sovereign debt and support the ailing state-owned electricity company, Eskom.
The rand has gained 5% against the dollar in January, trailing only Russia’s Ruble among emerging-market peers. That’s pared some of last year’s 14% drop, and brought the currency back to levels last seen before the August sell-off across developing nations.
Goldman’s strategists say rand volatility remains a concern, with next month’s annual budget seen as a significant risk factor, along with elections scheduled for May.
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