The South African rand has slumped to a five-year low over the past couple of days – in the process breaking through our end-year forecast of 11/$, which itself had been at the bottom end of consensus expectations only a few months ago. The rand has now fallen by 25% against the dollar since last May. And while we are wary of changing our forecasts against the backdrop of the current turmoil in EM financial markets, it goes without saying that South Africa’s large current account deficit, combined with renewed strike action in its key mining sector, means that there is clearly a danger that the rand falls much further over the coming months.
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