SA rand under pressure

Weaker global growth, market volatility and the political climate are the biggest issues affecting the rand, according to a Bloomberg poll.

The survey, released yesterday, captured the opinions of more than 160 local bankers, CEOs, CFOs corporate treasurers, and foreign exchange and hedge fund executives at a Bloomberg event two weeks ago. At the time, Reserve Bank deputy governor Daniel Mminele warned that the rand and other emerging-market currencies would remain volatile, adding complexities to monetary policy.

Mminele cited the continued tightening in global financial conditions, a change in investor sentiment towards emerging markets, escalating trade conflicts and geopolitical developments as key risks to the rand. According to the poll, more than one-third (37 percent) of those who responded cited global economic growth and market volatility while a third (31 percent said it was SA’s foreign investment. A few (21 percent) said US monetary policy would affect the rand, while 11 percent cited trade friction and tariffs.

On the local front, more than half the participants said SA’s political environment would affect the rand, while 22 percent thought the trajectory of interest rates would affect the currency. An improvement in the country’s political environment could help the rand strengthen significantly, said Old Mutual Investment Group’s head of economic research, Johann Els. The poll found that 17 percent think SA’s persistently high unemployment rate will affect the rand while 7 percent cited the battered mining industry. — BusinessLive.