Business

Rand expected to weaken: BER

28 July 2010

The rand is expected to weaken, the Bureau for Economic Research (BER) said in its latest survey on Tuesday.

"Although the rand should remain well supported for the time being, the BER remains with the view that a move to R8 to the US dollar and beyond is on the cards over the next 18 months."

The rand averaged R7.54 against the US dollar in the second quarter of 2010, the third consecutive quarter that it had remained around the R7.50 mark.

However, the impact of increased risk aversion following the European debt concerns could be seen in the monthly rand performance.

After averaging R7.37 to the US dollar in April, the rand weakened to average above R7.60 to the US dollar during May and June.

"The local currency was not immune to global developments, but one may have expected more pronounced weakness."

The BER expected the currency to weaken due to increased risk aversion if global growth slowed, muted further commodity price gains and sustained US dollar strength against the euro.

As a result, the rand was expected to average R7.75 to the US dollar in the fourth quarter of 2010, before weakening to an average R8.45 to the US dollar in the final quarter of 2011.

Against the euro, the currency was forecast to remain firm and to average R9.72 to the euro in the fourth quarter of 2011.

Sapa