As trade tensions and the Syrian conflict roiled markets this month, South Africa’s rand has been stuck in an unusually narrow range for one of the world’s most volatile currencies.
It can’t last, according to analysts at Rabobank and Danske Bank. With the currency holding between 11.80 and 12.15 per dollar, the only question is, which way will it swing?
One technical indicator, known as an inverse head-and-shoulders, suggests rand weakness is in store, at least in the short term, according to Piotr Matys, an emerging-markets currency strategist at Rabobank in London.
A close above 12.2320 per dollar would confirm a “bullish setup” for the greenback, with an initial target of 12.52 followed by 12.71, according to Matys. The rand slipped 0.2 percent to 12.0795 per dollar on Friday. The probability of the rand reaching 12.23 per dollar in the next month is 75 percent, according to Bloomberg calculations based on prices of options to buy or sell the currency.
Jakob Christensen, an analyst at Danske Bank in Copenhagen, has a different view. The rand will find it difficult to break out of its range in the short term, but will probably strengthen when it does. Danske Bank forecasts the rand advancing to 11.80 per dollar in three months, 11.50 in six months and 11 in 12 months.
The probability of the rand reaching 11 per dollar over the next year is about 41 percent, according to Bloomberg calculations.
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