14 Sep 2017

Week Ahead: Scope for SARB to reduce the repo rate at the September MPC as CPI inflation, and hence inflation expectations, are projected to moderate

Annabel Bishop

Chief Economist

The rand led the losses amongst a basket of 24 emerging market currencies over the course of the week, weakening by 1.7%. Renewed focus on domestic political developments weighed on the rand.

Figure 1: SA Monetary Policy Committee (MPC) meeting dates for 2017

Rand, currency outlook for the week ahead and foreign flows:

Figure 2: USDZAR

The rand led the losses amongst a basket of 24 emerging market currencies over the course of the week, weakening by 1.7%. Renewed focus on domestic political developments weighed on the rand. More broadly, the performance of the emerging market currency complex, was influenced by a lift in the US$ index. This was a function of the US consumer price inflation release for August. Although inflation remained below the Fed’s target, it came in higher than expected and lent support to interest rate hike expectations. In the week ahead, US Fed monetary policy guidance as well as the SARB interest rate announcement hold the potential to influence the rand.

In the week ahead, the rand is expected to trade in a range of R13.70/USD – R12.70/USD, R16.25/EUR - R15.25/EUR and R18.40/GBP - R17.40/GBP.

Figure 3: Purchasing Power Parity value of the Rand vs USD

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