Risks remain for the rand as 2018 draws to a close, Nedbank says
The currency is particularly vulnerable to emerging-market selloffs triggered by rising borrowing costs in developed countries
An expected seasonal dollar liquidity crunch means the outlook for the rand is anything but merry as the year draws to a close. Funding requirements of large European and Japanese banks going into year-end, together with the US Federal Reserve’s tighter monetary policy, will probably lead to greater demand for dollars and rising offshore funding costs, according to Mehul Daya and Walter de Wet, strategists at Nedbank. That would weigh on the rand, one of the emerging world’s most-traded currencies, they wrote in a note to clients.
“Global dollar liquidity shortages, both structural and seasonal, remain a key risk to the outlook for the rand,” said Daya and De Wet, who correctly predicted in June that SA’s currency could weaken to above R14/$ as global financial conditions became more restrictive. “Greater demand for US dollars and rising offshore US dollar funding costs, accompanied by currency volatility, will likely not bode well for the carry trade.” “We expect the rand to ...
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