The South African rand lost 30% of its value within 12 months after the start of each of the last four US rate-cutting cycles and 40% of its value within 15 months.
The start of a US rate-cutting cycle, combined with other global conditions, could have serious implications for the rand, says currency strategist at Rand Merchant Bank (RMB), John Cairns.
Speaking to 702, Cairns said that the last four times the US Federal Reserve cut interest rates, the rand weakened significantly within the following 12 months.
“On average the rand weakened 30% in the first year after the Fed cuts in the last full cycle,” he said. “This is ominous as the Fed is about to cut rates at the end of this month.”
Cairns said that the Fed cuts alone are positive for the rand as it encourages risk-taking and improves the country’s yield differential. This is part of why the rand has strengthened from R15/dollar to under R14/dollar, he said.
“This
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