Economist expects rand to continue to strengthen

ALAN PEAT WHERE GOETH the rand exchange rate? The sheer strength of the local currency last year, particularly against the US dollar, has been good for some, bad for others. Inflation and the general strength of the economy have benefited, but conversely, SA exports have been effectively priced out of a number of marketplaces. According to Standard Bank economics division forecasts, the rand will continue to strengthen in 2005 against the dollar, the British pound and the euro. After its average high of R10.54 to the dollar in 2002, the rand has eased to R7.55 in 2003 and R6.44 in 2004 – and the bank is putting its money on a rate of R5.77/US$1 for 2005. At the same time, the rand/GBP rate hit its high at R15.77, but has since slackened to R12.25 for 2003 and R11.79 last year – and is expected to continue this downward trend to R11.50 this year. The euro exchange, meantime, was at its strongest in 2002 at a level of R9.90/¤ – but also diminished to R8.53 in 2003 and R7.97 in 2005. The bank sees R7.88/¤ as the average for 2005. In its optimistic crystal ball gazing, Standard has taken a combination of factors into account, economist Elna Moolman told FTW. “Our credit rating has been upgraded,” she said, “and this should improve capital flows into SA. “The interest rate differential to these three foreign currency areas is also to our advantage. “And, last but not least, SA had a very high growth rate this last year, and good comparative growth to the US, the European Union (EU) and the UK.” All of which, she added, justified the bank exchange rate forecasts.