With the Rand now hovering around the 8.50 to the USD level, it is a fantastic opportunity to move your money into USD.
Following article by Garth Theunissen
South Africa’s rand may give up its 2009 gain by year-end as the global economic slump and domestic unemployment stymie the investment inflows needed to finance the country’s current-account deficit, according to Morgan Stanley.
South Africa’s currency may weaken to 9.80 per dollar by year-end, a 12 percent decline from 8.6052 as of 2:59 p.m. in Johannesburg, according to the note. That’s still stronger than the U.S. bank’s previous prediction of 10.80.
The rand has strengthened 11 percent against the dollar this year, making it the best performer of the 16 most-actively traded currencies monitored by Bloomberg, as investors boosted purchases of high-yield assets on speculation the worst of the global financial crisis is over. Foreign investors have bought almost 32 billion rand ($3.7 billion) more than they sold of South African assets this year, according to data from the nation’s bond and stock exchanges.
Those inflows may reverse as hopes of a global economic recovery prove to be “no more than a distant dream” and job losses in South Africa limit chances of a recovery in the continent’s biggest economy, making the country’s assets less attractive to overseas investors, according to Kafe.
The $278 billion economy shrank 1.8 percent in the fourth quarter and the International Monetary Fund predicts it will shrink by 0.3 percent in 2009.
The nation relies on foreign purchases of its stocks and bonds to finance the shortfall on its current account and prevent the rand from weakening. The gap reached 7.4 percent of gross domestic product last year, and will narrow to “about 6 percent” of GDP this year, Morgan Stanley predicts.
“The current account deficit remains a major risk to the currency,” Kafe wrote.
Last year the rand slumped 28 percent, making it the worst performing emerging-market and major currency, as foreign investors sold a record 70.8 billion rand ($8.4 billion) of South African nation’s stocks and bonds amid the global financial crisis, data from the country’s equity and bond exchanges, the biggest in Africa, showed.
“The recent spate of job losses should cap disposable incomes and keep the South African consumer in recession,” Kafe wrote. “We remain rand bears but are less bearish than before.”
Increasing joblessness may exacerbate the slowdown in South Africa, where consumers account for about two-thirds of the economy. As one of the more widely traded emerging-market currencies, the rand is often viewed as a proxy for investors’ appetite for risk.
South Africa’s unemployement rate rose to 23.5 percent in the first quarter, the highest of 62 countries tracked by Bloomberg, as a worldwide recession crimped demand for the nation’s commodity and vehicle exports, forcing mines and factories to fire staff.
Morgan Stanley expects the rand to average 9.50 per dollar in 2009 and 10 the year after. It may fall to 10.20 by the end of 2010, the brokerage predicts.