USD/ZAR likely to trade around 13.25 by end-2017, says Lloyds Bank

In this month, the South African rand was the second worst performing emerging market currency after the Argentine peso, noted Lloyds Bank in a research report. A surprise interest rate cut from the South African Reserve Bank and continued domestic political and policy uncertainty was a major drag on the rand. Therefore, USD/ZAR has traded in a relatively wide range of 13.65-12.56 since May.

Policy uncertainty is not expected to wane until the South Africa general election in 2019 at the earliest, stated Lloyds Bank.  Even then, neither South Africa’s structurally subdued economy, nor its high degree of external vulnerability, lend themselves to rand strength. Most foreign exchange valuation metrics indicate toward an overvalued rand even after the recent shift higher in USD/ZAR.

“We forecast USD/ZAR to end the year at 13.25”, added Lloyds Bank.

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