3% SA currency losing gusto in '09
I-Net Bridge | Tue, 14 Jul 2009 12:08[miningmx.com] -- CURRENT rand strength may prove unsustainable against developed market currencies with the local currency forecast to reach 10 to the US dollar, 12 to the euro and 15.10 to the pound, a leading financial services group said on Tuesday. That's the currency market view from Deutsche Securities, a locally listed provider of exchange-traded funds (ETFs) that capture international index performance. Deutsche Securities suggests that investors should consider placing a portion of their portfolio offshore even if they have already used up their foreign exchange allowance. Earlier today, Business Day, a financial paper, quoted analysts and traders as saying recent rand strength - which is a negative development for South Africa's mining companies - could not continue indefinitely. "We think most of the strength in the rand this year has happened and it's now in a consolidating phase. It has been hit by a triple whammy, a stronger dollar, reduced risk appetite and falling commodity prices," Michael Keenan, a currency strategist at Standard Bank's corporate investment bank told Business Day. "I think we are at the lower (stronger) end of trading ranges and would imagine the rand to weaken towards R9.20-R9.50 towards the end of the year," Gregor Krall, a technical analyst at BOE Private Clients told Business Day. Deutsche Securities argued that many commentators expect rand softness going forward, driving up the rand value of offshore investments. Gains would be compounded if offshore equities rose at the same time. "History suggests the rand can be vulnerable against the developed market currencies in the longer term. Though it is currently strong, it has weakened in the last five years by 25% against the dollar and by a little over 45% against the euro," said Kari van Rensburg, a director of Sandton-based Deutsche Securities. The Deutsche 'house view' is that by the end of 2010 the rand will be at 10 to the US dollar, 12 to the euro and 15.10 to the pound.
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