South Africa's rand to slip over 4 pct as Ramaphosa euphoria fades

By Vuyani Ndaba

JOHANNESBURG (Reuters) - South Africa's rand is expected to weaken more than 4 percent in 12 months as investors start to take profits from the over-bought currency on doubts of how much new President Cyril Ramaphosa can achieve in reforms.

A Reuters poll taken March 1-6 published on Wednesday showed the rand is expected to trade at 12.25 per dollar in a year, down from around 11.74 presently.

Markets have rallied since Ramaphosa was elected by parliament as South Africa's president last month since Jacob Zuma resigned on orders from the ruling African National Congress. But he faces an uphill battle in revitalising growth and creating jobs.

"We see any rallies in the rand being met by profit taking and scepticism that President Ramaphosa can transform the economy," said Christopher Shiells, emerging market strategist at Informa Global Markets.

The latest monthly Reuters poll of 34 currency strategists was taken before news that South Africa's economy expanded by 3.1 percent in the final quarter of last year, more than forecast and easily ahead of 2.3 percent in the prior quarter.

A Reuters poll last month said South Africa's economy is expected to grow 1.4 percent this year and 1.7 percent next year, suggesting those forecasts may already need to be revised higher. [ECILT/ZA]

"Ramaphosa has his work cut out for him - and his key objective should of course be to reduce constraints on GDP growth," Shiells said.

South Africa has also benefited from an unusually synchronised global economic expansion, but some analysts say they fear this could be damaged by a proposal from U.S. President Donald Trump to slap tariffs on steel and aluminium imports.

"If full-scale trade wars unfold and commodity prices fall, the rand would struggle to hold onto its impressive gains," said Piotr Matys, emerging markets strategist at Rabobank.

Moody's is due to publish a review later this month, which economists said in February would offer the country a reprieve.

South Africa will announce details of wide-ranging reforms at state-owned firms within four weeks, the public enterprises minister said on Tuesday, as government seeks to return credibility to companies hobbled by graft and mismanagement.

(For other stories from the global foreign exchange poll: [L4N1QN4P6])

(Reporting by Vuyani Ndaba; Polling by Indradip Ghosh and Khushboo Mittal; Editing by Matthew Mpoke Bigg)

2018-03-07 09:46:06

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