Money and Markets

These experts were right about the rand in 2018 – while Goldman Sachs got it spectacularly wrong

Business Insider SA
The rand/dollar rate over the past decade. (Johann Biermann)
  • Famously the world's most volatile major currency, some rand forecasts have been on the money.
  • The rand weakened to R14.47/$ at the end of 2018 - right in line with a Bloomberg poll.
  • But Goldman Sachs got it wildly wrong.

Hindsight is an exact science, while predicting the future of anything South African requires a big tolerance for disorder - and perhaps even a shot of lunacy.

Still, a number of economists managed to call the world’s most volatile major currency right in 2018.

The rand ended last year at R14.47 to the dollar – in line with the median prediction of analysts in a Bloomberg poll in December 2017. Their median prediction was for the rand to end the year at R14.50 per dollar. (Of course, in the midst of Ramaphoria, they scrambled to update their rand forecasts, and the median prediction was lowered to R12.30 by March.)

A Reuters poll of economists were somewhat further off the mark, predicting in January last year that the rand would reach R13.85 against the dollar by the end of that year. In a previous poll, towards the end of 2017, they predicted R14.30.

Read: The rand has been the world's strongest currency against the dollar over the past three years

Among the prescient forecasters were Hans Redeker and James Lord, forex strategists at Morgan Stanley, who expected the rand to reach R14.50/$ by the end of 2018. What’s more, they also predicted that the pound would weaken to $1.24 – implying a rand/pound rate of R17.99 at the end of 2018. The pound ended up at R18.32.

Most other predictions put the rand above R20 to the pound by the end of the year.

Petr Krpata, chief EMEA fx strategist, ING Group, and Sonja Keller, senior economist, JP Morgan, also got very close to the correct dollar/rand rate, while the Bank of America Merrill Lynch thought it would reach R15/$ by the end of 2018.

On the other end of the scale, Goldman Sachs proved to have been wildly optimistic in its forecast.

In January last year, Goldman released a report forecasting that the rand could reach R11.50 to the US dollar in 12 months.

Goldman Sachs identified South Africa as the “big emerging market story” of 2018, especially given the possibility of declining interest rates and a growth rate of above 2%. Instead interest rates rose and the country was hit by a recession.

Forecast for 2019

A month ago, the median forecast of more than 30 currency strategists polled by Reuters was that the rand would reach R14.33 by end-May this year.

“The rand is expected to be volatile with the upcoming elections, due to continuing structurally low South African economic growth and tighter US monetary policy as 2019 progresses,” Johannes Khosa, economist at Nedbank, told Reuters.

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