South African rand to continue to face moderate depreciation pressure against US dollar next year

The South African rand continues to be the currency, which would be badly impacted by rate hikes by the U.S. Fed, given its current account deficit of 5 percent of GDP. The sometimes notable depreciation but also the extreme volatility in the currency pair USD/ZAR signifies that South Africa is of just limited attraction for foreign investors, noted Commerzbank in a research note.

Imbalances in the external balance, along with rather unattractive real interest rates and a stagnating economy, combined with a likely downgrade of the sovereign rating comprise as a difficult environment for the South African rand.

Periods of recovery during which the South African currency can gain from increasing risk appetite are not expected to be sustainable. Therefore, there are risks of rand depreciating against the US dollar in the months ahead. The USD/ZAR pair is expected to reach levels at around 15.20 by the end of 2016, while moderate depreciation pressure is expected to continue next year, according to Commerzbank.