The Rand exchange rate is good news in a time when bad news seems to be the order of the day, with the rate continuing to strengthen over the past few months.
Although the strength of the local unit has analysts guessing when this bullish run will actually end and if so, at what level, some analysts have even revised their forecast for 2021 significantly lower.
The Rand fell to a low of R19.26/$ on 6 April 2020 during the first wave of Covid-19 infections, but then muscled its way to R13.43/$ on 6 June 2021. The Rand’s firmness prompted NKC African Economics, a provider of independent economic and political research on Africa, to revise its forecast for this year significantly lower.
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NKC says a combination of international and local factors has been the driving force behind the Rand’s recovery:
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NKC says it expects that the Rand will remain firm during the second quarter, as these trends are expected to persist for the rest of the year.
Despite a weak pass-through, the stronger Rand should also lower imported inflation as consumer price pressures start to intensify. However, should the US Fed commence tapering in the first half of 2022 and commodity prices start to decline, NKC expects the Rand to start sliding again.
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