The rand is forecast to remain stable against the dollar over the next three years, but depreciate on a trade-weighted basis, as the United States current-account deficit leads to dollar weakness, Econometrix economist Azar Jammine told a media briefing on economic prospects on Friday, hosted by Noah Financial Innovation.
The fourth-quarter average for this year is expected to be R6,71 per dollar, followed by R6,99 in the fourth quarter next year, then R6,80 in the fourth quarter of 2007 and R7,04 in the fourth quarter of 2008.
“These forecasts are based on the US dollar weakening against the euro due to the massive US current-account deficit. Our forecast is that the dollar will weaken to $1,30 per euro in the fourth quarter next year from $1,17 this quarter and then go to $1,36 in the fourth quarter 2007, before recovering slightly to average $1,33 in the fourth quarter 2008,” Jammine said.
On a trade-weighted basis, he is expecting the nominal rand index to ease to an average of 80,8 next year from an average of 91,8 this year and 91,7 last year.
In 2007, he only expects a moderate depreciation of the trade-weighted rand index to 76,3, followed by 75,3 in 2008.
It is government policy to craft policies so that the rand remains stable on a trade-weighted basis. — I-Net Bridge