Are the broken clocks shifting their dials?

It really does take a long time for the bank economists to catch on.  If it weren’t so sad, it would actually be funny!  It can’t be easy to be an ‘expert’ on something, yet manage to get it so horribly wrong just about all the time.  The RMB FX team (they fall under the department FICC) just a month or two ago were forecasting a USD/ZAR of 8.50 by end-2011.  We shouldn’t be so hard on them, it is really a disease affecting all mainstream Keynesian economists. They got whipped up in the Rand weakness frenzy of Jan and Feb that was driven purely by a few short-term, technical factors.  We still believe the Rand can strengthen substantially against the USD in years ahead.  The trend is in place to see the currency move toward the big figures of 6.00 and 5.00 into 2012.  Unlike the tidal shifts of the mainstream currency predictions, HA holds firm views that are based on a sound economic and philosophical framework.  This allows us to give you economic prognostications and insights that are accurate, coherent, and consistent.  Don’t be shy to double check our Rand views.

“Rand below 6.00 vs dollar possible”

May 3 2011 at 07:22pm

Financial services group Rand Merchant Bank (RMB) said on Thursday that a scenario of the rand trading below 6.00 against the dollar would not be a stretch of the imagination.

According to research conducted by Theuns de Wet, the head of RMB FICC Research, and currency analyst Nema Ramkhelawan, if the US Federal Reserve continued to use monetary expansion to prevent US economic growth from slowing markedly, the US dollar/rand could trade well below the 6.00 level by the end of next year.

“Whether South African policy makers will allow the rand to strengthen to these levels is debatable, but beyond the scope of this document,” the group added.

RMB’s core rand forecast was for a gradual weakening of the local currency to 7.00 by year-end. “Our estimate is based on a view that the factors currently driving US dollar weakness will moderate by the fourth quarter. However, we are not ruling out the possibility of significant rand strength as there is considerable uncertainty over the outlook for US monetary policy and growth,” De Wet and Ramkhelawan said.

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Related:

Confusion reigns at FNB economics – 9 Dec 2009
The problem with bank economists – 4 Feb 2010
RMB currency analysts are incoherent – 8 Feb 2010