South Africa: Rand rebounds in May
The South African rand (ZAR) recovered some lost ground against the U.S. dollar over the past month, chiefly thanks to recovering investor sentiment as the government gears up to reopen the economy. That said, the rand remains very low by historical standards, after a sell-off of emerging markets assets and credit rating downgrades by Moody’s and Fitch Ratings sent South Africa’s currency tumbling to an all-time low at the end of April. The South African rand ended 22 May at ZAR 17.71 per USD, marking a 7.0% appreciation over the same day in April. However, the currency was down 18.8% year-on-year and 21.0% year-to-date.
The rand gained ground in the second half of May as the easing of lockdown regulations globally boosted investor demand for emerging-market currencies. Similarly, expectations that the South African economy will largely reopen from 1 June further pushed up demand for ZAR, while a larger-than-expected rate cut by the SARB on 21 May also pushed the rand higher.
The rand is currently set to remain largely stable through year-end, although the outlook is highly uncertain. Further ahead, the rand should rebound more decisively, after the economy emerges from the Covid-19 related downturn.