USD/ZAR: Global growth fears will hold back further upside for Rand in near-term – MUFG

In November, the South African Rand strengthened sharply against the US dollar from 18.340 to 16.956. However, the USD/ZAR could move back higher amid slowing global growth, economists at MUFG Bank report.

Global growth will continue to slow sharply heading into next year

“There is still a risk in the near-term that global growth will continue to slow sharply heading into next year and financial market volatility could pick-up again.” 

“The Rand remains sensitive to the outlook for global growth and external financial conditions with South Africa’s current account surplus moves back into deficit as the pandemic impact reverses further. South Africa’s terms of trade have deteriorated throughout most of this year but have started to improve in November offering more for support for the rand as well.”

“We expect the Rand to strengthen further in the year ahead although not without setbacks in the coming quarters with the global growth set to be weak at the start of next year.”