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

The USD/ZAR pair has continued its downward trend, but has failed to test the March low of 12.31, noted Lloyds Bank in a research report. Slightly surprising has been the relative resilience of the South African rand to the ongoing economic and political challenges faced by South Africa.

Neither the outright recession in the first quarter not another credit rating downgrade had a huge impact on the rand. Similarly, there was a muted response to an unsuccessful attempt to remove scandal-ridden President Jacob Zuma from power. This, in spite of hopes than an early end to his president would enhance financial stability.

Such benign market conditions might result in some to speculate that the worst has already been priced into the exchange rate. However, the foreign exchange market is believed to be underestimating the risks to the South African economy from the current political turmoil. According to Lloyds Bank, the USD/ZAR pair is expected to trade at around 13.25 by end-2017 and at 14.25 by end-2018.

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