The Rand advanced against the U.S. Dollar and Pound Tuesday after official data showed the economy growing faster than was anticipated in the final quarter of last year, but local analysts are warning of risks to the South African currency that are lurking in the longer grass of this month.
The Rand has risen more than 1% against the U.S. Dollar and other major currencies in the last week and could go on to enjoy a solid bid from the market throughout the coming month, according to economists at Investec Bank, although Moody's could soon gatecrash the party in South Africa.
The Pound-to-South-African-Rand rate was trading at 18.07 Monday after rising more than 0.5% in the previous week, although the exchange rate is set to remain directionless within an established multi-month range during the days ahead.
The Rand was volatile Wednesday after Finance Minister Tito Mboweni set out its latest budget plan and as markets attempt to gauge whether its proposals for the public finances will be enough to save the nation's top credit rating.
Investors are seen selling the South African unit ahead of the country's annual fiscal statement as uncertainty over the state of the national utility supplier Eskom, as well as the possible introduction of new laws on land reform, weigh on the outlook.
The Rand will be vulnerable to further losses during the months ahead, according to analysts at UniCredit Bank, who are telling clients to sell the South African currency ahead of next week's budget statement from the government.
The Rand is at risk of fresh weakness during the months ahead according to economists at Investec Bank, who say South Africa could see the outlook for its credit rating downgraded if the February budget does not go according to plan.