S.Africa's rand seen stronger in 12 mths

REUTERS

JOHANNESBURG: South Africa's rand may remain trapped in ranges in coming months but should appreciate modestly against the dollar by early next year on higher interest rates and an improving global economy, a Reuters poll showed on Thursday.

A survey of more than 30 currency strategists and economists expect the rand, which is highly sensitive to global sentiment on risk to hold steady against the dollar in the next six months, firming to 7.65 by the end of April next year.

The rand is currently trading at around 7.73 per dollar.

"As the global economy picks up a little bit, the United States should improve, improving the risk sentiment and that should see the rand appreciating as well," said Benjamin Reitzes, senior economist at BMO Capital Markets.

The last two monthly Reuters polls have predicted a steady strengthening for the currency, and some analysts continue to see opportunities in the longer term.

The rand is a notoriously volatile currency and there is a widening gap between the forecasts as the time horizon extends into next year. Forecasts for 12 months ranged from 6.80 to 9.20, broader than in April's poll.

Interest rate differentials between Africa's largest economy and the developed world are expected to widen further, offering support to the rand.

The South African Reserve Bank's repo rate is expected to rise while interest rates in rich countries sit close to zero.

The latest monthly Reuters Econometer expects the repo rate to rise by 100 basis points to 6.5 percent by the end of 2013, with the first rise of 50 basis points expected in the first quarter of next year.

"In a longer period of time this should be more important," said Asmara Jamaleh of Intesa Sanpaolo, although that is unlikely to support the currency in the short-term.

With a global economic recovery slowly picking up steam, traders are seeking opportunities to borrow in low-interest rate currencies of the developed world to fund riskier but potentially more rewarding investments in markets such as South Africa.