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The exchange rate forecast for the rand remains widely dispersed, said Deputy Governor of South African Reserve Bank (SARB) Daniel Mminele on Wednesday.
It is likely that the rand, as well as other emerging market currencies, will remain volatile, he said at the Bloomberg FX event in Johannesburg.
"Due to recent volatility, exchange rate forecasts remain widely dispersed," said Mminele.
Between the current quarter and the third quarter of 2019, the rand's exchange rate is expected to average 14.50 rand / US dollar, according to Bloomberg's median forecast.
"However, the difference between the most optimistic and the most pessimistic survey participants regarding the exchange rate forecast for the first quarter of 2019 is almost R 3.00," said Mminele.
"The future remains uncertain.The continued tightening of the global financial situation, the change in investor sentiment towards emerging countries, the escalation of trade conflicts and geopolitical developments as well as certain specific risks, remain the main risks for the local currency. "
He explained that such a large dispersion around the median forecast on such a short horizon is representative of the uncertainty that has become "inherent to our lives".
"This uncertainty adds considerable complexity to the conduct of monetary policy, the most recent outcome of our monetary policy meeting and the finely balanced decision is a good example," said Mminele.
The SARB PPC was split on the recent decision to increase the repo rate by 25 basis points to 6.75%.
"A forward-looking and medium-term monetary policy in a flexible inflation targeting framework requires us to look at volatility and focus on macroeconomic fundamentals, as indicated in our most recent review of the macroeconomic fundamentals. monetary policy, "said Mminele.
"In this spirit, we will continue to allow the exchange rate to absorb the initial shocks and focus our policy actions on second-round effects on prices … it is important that political decisions are not influenced by short-term market developments. "
He added that in circumstances such as these, it is more difficult for some investors to ignore the contagion risk in emerging markets.
"Despite this, our conversations with global and local investors have reaffirmed that differentiation, based on a top-down badessment of the global economic environment of emerging markets, has increased over the years," said Mminele. .
"This seems to indicate that investors are reevaluating their investments in emerging countries selectively."
According to Bloomberg, the rand has depreciated 28% from late February to early September, "peaking" at 15.70 rand to the dollar on Sept. 4.
The rand has also weakened on a trade-weighted basis and its real effective exchange rate has fallen below its long-term average.
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