Emerging market currencies are currently expected to strengthen next year – but government-determined factors could spoil things for the rand in a big way.
While positive global factors favour the rand moving forward, some economists warn that poor governance could neutralise any benefits and steer the rand to a new low against the US dollar in 2024.
According to Investec Chief Economist Annabel Bishop, strong US labour numbers and prices paid indicated that US labour market weakness is needed to tame inflation. At the same time, Unit labour costs also grew from 1.6% to 2.2%, exacerbating concerns regarding the relatively high inflation levels in the US compared to previous years.
“The Fed is expected to at least pause in its interest rate hike cycle this month, and the risk of further hikes this year is one of the key reasons keeping the rand weak,” said Investec. However, Investec and HSBC economists warn that government-determined factors will still have a massive say in the rand’s performance.
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