Expect the rand to remain steady

ALAN PEAT THE SA rand is unlikely to lose much against the US dollar in the next two years, according to Standard Bank economist, Dr Elna Moolman. Nor for that matter, against the British pound, the euro or the Japanese yen – and, indeed, there will be certain gains in parts of that three year period. Last year’s average exchange rate was R6.33 to the dollar, and the bank forecasts R6.37 for this year, and R6.58 for 2007. Against the pound, the average was R11.5 in 2005, and is expected to gain to R11.43 this year, but drop to R12.00 in 2007. For the euro, the 2005 figure was R7.83 and it is forecast to remain at that rate this year and slip out to R8.25 in 2007. The yen is expected to lose a little from last year’s 17.44 to the rand, being forecast at 18.25 for 2006, but then to gain to 16.66 in 2007. “Two sets of assumptions underpin these forecasts,” Moolman added. Firstly, the US dollar is expected to weaken as a result of the twin (current account and budget) deficits in that country. “By default,” said Moolman, “this means that the rand will be relatively strong against the dollar.” Secondly, she cites the benign domestic economic conditions and outlook attracting international capital flows which, in turn, supports rand strengthening. “These include strong economic growth, which we expect to exceed 4% in the foreseeable future,” said Moolman, “which beats the growth rates in most of our trading partner countries.”