Currency outlook for the week ahead and foreign portfolio flows:
Over the last week the rand has strengthened by a modest 0.8% whilst most emerging market currencies weakened in line with a stronger US$. The US$ has gained on expectations of tax reform being passed and expectations of an infrastructure spending plan being introduced early next year. Favourable tax reform and increased fiscal spending would support expectations of stronger US economic growth and higher inflation. In the event, markets could be expecting more Fed tightening. In the meantime, a hike at next week’s FOMC is priced in. This week’s modest gains in the rand may have been linked to market sentiment surrounding the outcome of ANC branch nominations that show Deputy President Cyril Ramaphosa is just in the lead. Heading into next week the rand can be expected to remain influenced by any further domestic political events in the lead up to the ANC conference taking place between 16 December and 20 December.
In the week ahead, the rand is expected to trade in a range of R13.10/USD – 14.10/USD, R15.50/EUR - R16.50/EUR and R17.70/GBP - R18.70/GBP.