Moody’s Economy.com says while the rand could remain vulnerable to further bouts of weakness and volatility in the coming months, its medium-term outlook is for a stronger rand amid rising foreign reserves and strong inflows of foreign direct investment.
“The rand has been on a strengthening run against the buck for well over a month now. Strong flows of foreign funds have provided solid support for the rand in recent weeks and have also helped to push the domestic stock market to record high levels,” say Moody’s Economy.com economists Paul Guest and Dr Ruth Stroppiana.
“As the stability of the rand and the domestic stock market is heavily dependent on international capital flows, there is a risk a slowdown in overseas investment activity will undermine the value of South African assets.
“Nevertheless, as the country continues to build its foreign-exchange reserves, temporary slowdowns in the flow of funds, such as occurred early this year, will become less of a threat to the stability of the nation’s financial markets,” conclude the researchers.
While the rand regained traction against the majors to hit a series of 11-week best levels against the greenback this week (testing R7,10 to the dollar), the currency was last slightly weaker at R7,2750 to the dollar from an overnight close of R7,2346.
A rand trader said the rand had weakened due to a big euro-rand order that went through late London time on Thursday in an illiquid market. This resulted in stop losses being triggered through R7,20 to the dollar. — I-Net Bridge