| The Rand's short term outlook
depends heavily on how much is actually realised from the upcoming privatisation process.
Indications of some possible postponements and suggestions that the timing of the process
will determine how much is actually realised, are not all that positive. Even with the
fundamentals in place such as steady economic growth, the SARB's unswayed commitment to
inflation targeting and an imminent Euro bond issue which is expected to be
oversubscribed, things can turn sour. Any negative sentiment, such as Zimbabwe and the
like, and the fact that SA is an emerging economy places SA in a very vulnerable situation
against such exogenous yet very threatening factors. Some
SA financial institutions believe the Rand is currently overvalued and that further
downward pressure can be expected during the year. This pressure is not fundamentally
based, such as the PPP theory, as the Rand is depreciating faster than the inflation
gaps between its trading partners. |
