Walter de Wet, an analyst at Nedbank Group Ltd. who correctly predicted the rand's rally since April, says it's time for caution after the South African currency breached 16 per dollar this week.
While not outright bearish yet, De Wet recommends taking a neutral stance on the rand after a seven-month, 19% rebound from a record low during the worst of the Covid-19 selloff. Once it reaches 15 per dollar, he would turn bearish, De Wet said in a client note.
De Wet predicted on April 9 that the rand would recover to closer to 15 per dollar within six to nine months, from as weak as 19.35. His forecast was based on Nedbank's so-called extreme peak model, which theorizes that the rand tends to react with extreme moves to crises, before heading back to its long-term trend.
“In April, it may have felt different, but it turns out that this time was no different after all,” De Wet said. “This week, the rand moved back within 1.5 standard deviations of our model trend, a level where we believe a more neutral stance is warranted from a fundamental perspective.”
The rand was little changed at 15.6997 per dollar by 1:26 p.m. in Johannesburg, bringing its advance this week to 3.5%.
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