Johannesburg - The currency that was forecast to perform the worst in emerging markets this year is also the one benefiting most from the clamour to boost returns in the wake of the UK’s Brexit vote.
South Africa’s rand has strengthened 4.9% against the dollar since the day before the UK voted to leave the European Union on June 23, the most among 31 major and developing-nation currencies tracked by Bloomberg and bringing gains this year to 11%, trailing only Brazil’s real and the yen. Yet analysts still see the currency giving up those gains through the rest of the year.
The odds are stacked against the rand. Africa’s most-industrialised economy contracted in the first quarter amid a slump in commodity prices and the worst drought on record, and the country may have its credit-rating downgraded to junk in December. A municipal election on Wednesday is adding to political risks after President Jacob Zuma roiled markets in December by firing a respected finance minister. For now, that hasn’t deterred the wall of money seeking returns as developed-nation policy makers keep interest rates low to stimulate their economies.