Rand likely to hit R21.40 against the dollar in 2024, Investec warns

The rand could hit as high as R21.40 against the dollar in 2024 according to a severe down-case scenario reported by financial institution Investec. Picture: Ian Landsberg/Independent Newspapers

The rand could hit as high as R21.40 against the dollar in 2024 according to a severe down-case scenario reported by financial institution Investec. Picture: Ian Landsberg/Independent Newspapers

Published Apr 23, 2024

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The rand could hit as high as R21.40 against the dollar in 2024 according to a severe down-case scenario reported by financial institution Investec.

According to Annabel Bishop, the chief economist at Investec, the rand is under severe pressure due to a number of situations impacting the currency.

Bishop said that the rand will be affected by a strong US economy as positive data on US retail sales and housing illustrated a resilient US economy.

She said the rand may be weakened by the fact that the US may cut their interest rate soon and this is coupled with the fact that global inflation is on the rise, according to the International Monetary Fund (IMF).

In Investec’s ‘severe down case’, the rand could average at around R20.49 against the dollar with it reaching as high as R21.40 in the fourth quarter.

In this scenario, Investec forecasts a rather long global recession, with high inflation, and adverse weather conditions that will ultimately impact the rand's strength.

According to Investec’s ‘base case’ scenario, the rand is forecasted to trade at around R18.20 against the dollar by the second quarter of 2024. Investec said that it expects that the rand will average around R18.17 against the dollar in 2024.

In this base case scenario, SA’s economic growth is expected to be moderate.

According to Anchor Capital, on Monday, the rand weakened against the dollar. In the US, the Chicago Fed national activity index rose in March impacting the rand.

The rand was trading at around R19.17 by the close of business on Monday.

The rand was trading at around R19.24 on Tuesday at 9am. The rand was trading at around R20.48 to the euro and R23.73 against the pound.

Another forecast: A technical recession

Last week, First National Bank (FNB) projected that SA could experience a technical recession if the South African Reserve Bank (Sarb) continues to keep interest rates higher than what is required.

This stark prediction from economists at FNB highlighted that SA consumers are facing immense financial stress and the high interest rates are exacerbating this issue.

“Prolonging rate cuts beyond necessity, particularly when broader financial conditions are already restrictive, could further stifle growth and heighten the likelihood of a technical recession,” FNB said.

Interest rate increases have noticeably affected the portion of household income allocated to servicing debt, rising from an annualised nominal R312 billion in the fourth quarter of 2019 to R411 billion in the final quarter of 2023, FNB concluded.

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