[ADVISOR VIEW] Based on macroeconomic forecasting models, the Russia-Ukraine conflict, and the hawkish stance by central banks, we see the rand trading around R17.42 to the dollar at the end of this quarter: MichaelHaldane - GlobalLocalZA. Markets
The weaker dollar helped the South African rand climb to R16.80 per US dollar, its best level since August 17th, while domestic inflation data increased the likelihood that the Monetary Policy Committee will raise interest rates at its upcoming sessions.
Generally, higher interest rates typically raise borrowing costs, lower disposable income, and restrict growth in consumer expenditure. Additionally, higher interest rates support the strengthening of the local currency, which thus lowers the competitiveness of exports and increases the cheapness of imports. However, these interest rate hikes have not come in favour of the rand, as the rand continued to slide past the once psychological support level of R15.
Russia and Ukraine play a pivotal role in the global food and energy markets, exporting 70% of global sunflowers, accounting for a third of potassium fertiliser exports, 25% of global wheat exports, and 12% of crude oil shipments. Furthermore, Ukraine is home to a quarter of the world’s super fertile chernozem soil and exports enough food each year to feed about 400 million people.
Because of the greatest Covid-19 wave in two years, which has hampered China’s efforts to normalise its economy, the world’s top consumer of raw resources and commodities is expected to slow down in 2022. It is anticipated that China’s real growth for 2022 will plunge to 4.3%, down from over 7% in recent years, which has been boosted by accommodating policies. The slowdown in the Chinese economy has led the Chinese government to devalue its currency in an attempt to stimulate its export sector.
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