The rand has broadly stabilised and this is a much better level for the currency to be at, according to Professor Ben Smit, director of the Bureau for Economic Research (BER), who was speaking during a conference on Thursday morning.
“It is relatively stable within a relatively broad band,” said Smit.
“However, a variety of factors indicate the rand may depreciate going forward, for example aspects like the current account deficit. It may not come from SA, but could be in emerging markets in general.
“Liquidity in emerging markets has helped, but it could change if there is some problem. Also commodity prices have been a factor and a sharp decline could have an effect,” he added.
Smit pointed out that the BER’s latest forecast was for the rand to be at 7,50 by the end of the year on a quarterly average basis taking current conditions and perceived risks into account. The BER forecast, according to their second quarter 2007 report, is a rand at 7,93 to the dollar at the end of 2008 on an average quarterly basis.
The BER report stated that private equity deals could support the rand over the near term.
However, the BER said that while they were adopting a view of contained currency depreciation over the short term, the rand remained at risk of a sharper depreciation in the event of a capital flow reversal of any meaningful magnitude. – I-Net Bridge