Reserve Bank can do little to cushion the rand in coming months, says Commerzbank
It has not been a good time for the rand since the last meeting of the South African Reserve Bank (SARB) in May, and there is not much the central bank can do to cushion the currency in months to come, according to Commerzbank. The rand had its worst month in more than two years in June as the US and China exchanged tariff blows at a time when the prospect of rising US rates also weighed on emerging-market assets. The weaker currency and higher oil prices are adding upside risks to inflation in SA. The situation seems ripe, then, for a rate increase, but the fragile South African economy puts its central bank "between a rock and a hard place", Commerzbank economist Elisabeth Andreae said in a note to clients dated July 12. Output contracted 2.2% in the first quarter, and the economy is forecast to expand just 1.6% in 2018. "The prospect of rate hikes can dampen the depreciation pressure while higher financing costs would put additional pressure on the economy," Andreae said. "Conver...
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