South Africa's rand is expected to trade slightly firmer towards the end of the year after weakening last week on the prospect of a December interest rate hike by the United States Federal Reserve, a Reuters poll found. The end of the year will be a very tense time for South Africa as the ruling African National Congress is due to pick a successor to President Jacob Zuma, a process likely to add fuel to already volatile markets.
Still, the median forecast of over 40 analysts polled this week suggested the rand would strengthen to 13.65 per dollar by end-December from the 13.73 it was trading at earlier on Friday and then slip back to 13.73 nine months later. "It would be greatly surprising if the rand does not come under pressure on the back of the ANC elective conference in December," said Rafiq Raji, chief economist at Macroafricaintel.
"Afterwards, rand trading would likely discount the earlier political uncertainty and be less volatile." South Africa's central bank kept its benchmark repo rate at 6.75 percent last month, defying expectations for a cut based on easing inflation pressures and a sluggish recovery from a recession in the first half of the year, a measure that could boost the rand.
It has been questioned how much longer this year's emerging market rally can last, with currencies such as the Russian rouble and Turkish lira set to give up gains of over 4 percent in the next 12 months.
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