Cape Town – Although the rand briefly weakened on the back of the surprise interest rate cut last week, it does not mean the currency will persistently weaken, say Dave Mohr and Izak Odendaal, investment strategists at Old Mutual Multi-Managers.
In a company note issued on Monday, Mohr and Odendaal say the relationship between interest rates and exchange rates is not nearly as “mechanical” as is often assumed.
“Rather, commodity prices, perceptions of global monetary policy and sentiment towards emerging markets will determine the outlook for the rand over the medium term, and if favourable, the currency could even continue strengthening despite possible further rate cuts.”
