Rand is setting up to surprise in 2010

Nouriel Roubini’s RGE Monitor has caught on we’ll see a strong Rand in 2010 (see ”Carry Trade Hotspots: A Currency by Currency Forecast for 2010“, we may not reproduce it here). We also get the sense from paging through Business Day and listening to analysts on CNBC Africa that the consensus amongst SA economists’ has turned toward a ZAR bullish bias. We find this rapid change in sentiment a bit disconcerting, but find comfort in the fact that our forecasters are still only moderately bullish, with no mention of a sub-6 USDZAR, not to mention a sub-5 USDZAR in 2010. RGE says they believe the Rand still has further room to run, but that strength will be constrained by a topping gold price. Human Action agrees on the first point, but as readers will know by now, disagree on the second. The Rand will be driven stronger by the same factors that has driven the gold price to levels well above $1,000/oz (see further reading below for more details).

It will be interesting to see what our Reuters poll participants come out with in December and January 2010; just in November 2009 the 20 ‘pollsters’ came out with a median (and mean) forecast for the USDZAR of 8.05 (and 8.12) in 2010. Our core view remains for an average USDZAR of 6.40 in 2010. We foresee a high probability that the Rand runs to 5.50 or lower in 2010, but that at this point local industry and policymakers will be publicly wailing and gnashing their teeth, in the process providing ammo and authority to the SARB to step in and forecefully manage the value of the Rand weaker.

Further reading on Human Action’s Rand view:

Explaining Rand strength to the non-economist
Quality and Quantity: A powerful currency prediction framework