Standard Bank Sees Greater Chance of ‘Sharp’ Rand Pullback

The risk of a temporary rebound for South Africa’s rand has increased “sharply” since December as the currency overshot fair-value levels, according to Standard Bank Group Ltd.

While the longer-term outlook for the currency remained bleak, the rand’s exchange rate is becoming “stretched” when compared to Standard Bank’s fair-value estimate of 15 per dollar, Johannesburg-based strategists Walter de Wet, Shireen Darmalingam and Penny Driver wrote in a report on Thursday.

The rand has slumped 16 percent in the past three months amid lower commodity prices, a slowdown in China and the prospect of rising rates in the U.S. It dropped to a record in December after President Jacob Zuma fired his finance minister. The currency of Africa’s most-industrialized economy gained 1.6 percent to 16.17484 per dollar by 4:46 p.m. in Johannesburg.

“We still see the fundamental underpin for the rand as weak,” the Standard Bank strategists said. “However, we do not expect the sharp rate of depreciation of early November to mid-January to recur.”

Standard Bank forecast the rand at 17 per dollar by the end of the second quarter before recovering to 16.25 by year-end.

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