British Pound vs South African Rand Outlook: Barclays Forecast ZAR Weakness in Coming Days

In early afternoon trade on Wednesday we see the British pound sterling to South African Rand exchange rate sink lower by 0.27% on a day-to-day comparison.

The Pound / Rand exchange rate is now quoted at 16.3741.

The outlook for the Rand is negative

Barclays analyst Mike Keenan says October is traditionally poor for the Rand:

"USD/ZAR is poised near 10.00 as it takes a breather near the midpoint of its four-month range (9.54-10.51). The pair exhibits a bullish seasonal in October and given the plethora of support at the 200-day moving average and 26-month trendline, we are targeting 10.51 and higher in Q4 13. Only a close below 9.90 would prove us wrong for a temporary correction to 9.54."

We would expect the pound / rand exchange rate to mirror moves in the headline dollar rand exchange rate.

Also likely to weigh on ZAR in coming days is the possibility of fresh selling pressure on global equity and commodity markets, a move traditionally seen as ZAR-negative.

"Despite favourable market positioning we still believe that the ZAR is vulnerable over the coming days because the next round of US employment data could rekindle Fed tapering expectations, while concerns surrounding the US debt ceiling could be conducive to a risk-off trading environment," says Keenan on the near-term outlook.

(Note, this week's US employment data has been cancelled owing to the Government shutdown).

Nevertheless, Keenan does concede that he is 'less bearish' towards the South African currency as of late:

"We have become less bearish about the ZAR’s outlook in the near term following the Fed’s decision to postpone QE tapering. However, we still expect the ZAR to exhibit a weakening bias during the latter half of the year because Fed tapering is still en route and SA’s fundamental backdrop and terms-of-trade situation are unlikely to have improved by the time tapering eventually commences.

"Hence, even though we are cognisant that the ZAR is still fundamentally undervalued and market positioning remains short-ZAR from a long-term perspective, we believe the currency remains vulnerable to renewed weakness, albeit to a lesser degree than we previously anticipated over the coming months."