South Africa's rand will hold its ground against the dollar, with a firmer bias in the next 12 months, as the trade account improves and foreign buying of local bonds remains robust, a Reuters poll found. The rand has seen bouts of selling pressure in the last couple of months because of South Africa's wide current account and sagging commodity prices, as China's growth faltered in the first quarter.
Twenty-eight analysts polled by Reuters globally see the currency remain resilient during the year. In 12 months, the rand is expected to make gains of almost two percent to 8.90 per dollar, from current levels at 9.0640 per dollar. "When considering the past depreciation of the currency, it is going to lead to an adjustment of the trade deficit, imports will be constrained and exports will improve," said Murat Toprak, a forex strategist at HSBC.
Analysts still consider interest rate differentials between South Africa, Africa's biggest economy, and rich nations to be beneficial for the rand as global investors continue to search for yield. The trade deficit narrowed to 7.77 billion rand ($866 million) in March from 9.52 billion rand in February. Exports of mineral products and base metals increased, bolstering the rand.
But wage negotiations in the mining sector in May could keep the rand under pressure, with increasingly militant mine workers expected to press their demands during the wage negotiations. Benchmark interest rates are expected to remain at 5.0 percent, a 40-year low, but there is the possibility of a rate cut due to disappointing data for Africa's biggest economy.
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