The rand strengthened by 3.1% over the last week to R11.65/USD currently. On a year to date basis, the rand has gained 6.4% to be the best performer amongst a basket of 24 emerging market currencies. These gains reflect the effects of the positive perceptions surrounding the recent domestic political developments. Aside from this, global risk appetite remains broadly intact which has had favourable effects for emerging market currencies. The risk appetite for higher-yielding assets has been a contributing factor to US$ depreciation of 1.7%, on a trade-weighted basis over the last week, to its lowest level since 2014. 

Heading into next week, market participants will digest the State of the Nation address, to be delivered after market close this evening, for policy markers under the new leadership of President Ramaphosa. An additional influence on the currency is likely to be the 2018 Budget on Wednesday 21st February owing to the implications for SA’s sovereign credit rating. SA’s credit rating with Moody’s, which is presently one notch above non-investment grade, is on review for a downgrade. Moody’s noted that this review would assess the “size and the composition of the 2018 budget.”

In the week ahead, the rand is expected to trade in a range of R11.15/USD – R12.15/USD, R14.05/EUR - R15.05/EUR and R15.90/GBP - R16.90/GBP.