Rand dips below R14 against dollar

The South African rand has broken past the R14 mark against the US dollar, reaching a 16-month high. This surge comes after credit rating agency Moody's decided to skip the ratings decision last week Friday. In a recent CNBC Africa interview, Alexander Forbes' Chief Economist Isaiah Mhlanga and Rand Merchant Bank's Currency Economist John Cairns shed light on the factors influencing the rand's movement. Cairns highlighted the currency's appreciation trend, emphasizing that further gains cannot be ruled out in the short term. Mhlanga echoed this sentiment, pointing out three key drivers behind the rand's strength: global monetary policy, commodity prices, and South Africa's financing needs. Despite the consensus that the rand is currently at fair value, both experts believe that the currency could continue to strengthen in the near future. Cairns cautioned about the rand's volatility, stating that the currency is among the most unpredictable in the world. He predicted that the rand would likely trade weaker than fair value for most of the year due to domestic economic fundamentals. Looking ahead, Cairns and Mhlanga discussed the potential impact of US economic indicators on the rand's performance. They estimated that full employment in the US could be reached towards the end of next year, with the Fed possibly adopting a more hawkish stance by 2023. They also highlighted the importance of the Fed's tapering decision and its effects on the rand's value. Mhlanga addressed the domestic political landscape, indicating that recent political developments in South Africa are unlikely to have a significant impact on the currency. He dismissed the notion that President Cyril Ramaphosa's political maneuvering would lead to immediate foreign direct investment inflows. Cairns and Mhlanga concurred that Moody's decision to maintain South Africa's credit rating had minimal impact on the currency, as the market had not anticipated a downgrade. In conclusion, both economists expressed optimism about the rand's outlook, citing positive economic indicators and global trends as driving forces behind the currency's recent strength. While uncertainties persist, particularly in relation to US economic policies and domestic challenges, the consensus remains that the rand is positioned for further gains in the foreseeable future.