The rand raced back to firmer ground after the Reserve Bank hiked interest rates more than the markets expected. The pullback followed two and half months of relentless downward pressure caused by a barrage of bad news on the domestic front, including fading growth prospects on the back of the worsening electricity crisis, the country's greylisting by the Financial Action Task Force (FATF) and S&P Global's downgrade of SA's credit ratings outlook. Adverse global developments weighed on the rand for much of March as global risk aversion spiked on the turmoil in the parts of the advanced country's banking sectors.
The short-term outlook for the rand remains unfavourable, with global risk sentiment expected to remain volatile and weak as investors scrutinise news on the US and other banks while anxiously waiting for US interest rates to peak and pivot. The ongoing global economic slowdown and falling commodity prices will also hurt the rand. We still expect the rand to stage a more convincing recovery towards year-end as inflation recedes, and global growth prospects improve.
