Is the rand going back to R17 against the dollar?

South Africa's new government celebrated its 100th day in power, sparking hope in the market that the country may finally be finding its footing after a challenging period. The coalition government has been credited with lifting market sentiment, with the rand reaching a 20-month high against the dollar. The question on everyone's mind is how much further can the rand strengthen, and how long will this rally last? To shed light on these questions, Mamokete Lijane, the Global Markets Strategist at Standard Bank CIB, and Manqoba Madinane, a Strategist for Fixed Income, FX, and Commodities at RMB, joined CNBC Africa for an insightful discussion. Mamokete Lijane shared her views on the rand's recent performance, highlighting the surprising strength it has shown. She pointed out that the improved outlook for South Africa, coupled with Chinese stimulus, has been driving the currency's rally. Given Africa's highly cyclical nature, the rand reacted positively to the global growth and commodity price outlook driven by China. Manqoba Madinane also weighed in on the rally and emphasized the importance of fundamentals in supporting the rand's performance. He noted that the speed at which the rand has rallied may be a cause for surprise, but the broader commodity rally has underpinned its strength. Despite the rapid ascent, he believes that the rally is more structural than temporary. The conversation then shifted to the Federal Reserve's upcoming meeting and market expectations of a 50 basis points cut. Mamokete Lijane delved into the Fed's stance on growth and inflation, suggesting that while the Fed may opt for a 50 basis points cut if growth concerns escalate, they are likely to revert to 25 basis points cuts in the future. She highlighted the delicate balance the Fed faces in addressing growth worries without causing market instability. Manqoba Madinane echoed the sentiment, focusing on the Fed's response to rising unemployment rates and its impact on monetary policy. He emphasized the importance of the Fed's commitment to supporting the economy amidst uncertainty, suggesting that further rate cuts may be on the horizon. When discussing the bond market, both experts outlined the bull and bear cases for bonds in the current economic environment. They agreed on the potential for further rally in bond yields, driven by improving risk premiums and favorable inflation trends. The structural unwind of risk factors was identified as a key driver for long-term bond performance. In terms of investment positioning, Manqoba Madinane advocated for a long duration strategy, citing the attractiveness of commodity-centric assets like rand assets. Mamokete Lijane recommended a shift towards equities given their favorable valuations and potential for outperformance in the current cyclical play. Looking ahead, Mamokete Lijane and Manqoba Madinane provided their three-month and six-month outlook for the rand. Mamokete anticipated a range of $1650 in three months and a lower $1620s level in six months. Manqoba projected a potential overshoot of fair valuation towards $1680 in the upcoming months, contingent on evidence of incremental reform. In conclusion, the discussion highlighted the dynamic factors influencing South Africa's economic landscape and the rand's performance. While global trends and stimulus measures play a crucial role, the experts underscored the importance of fundamentals and reform efforts in sustaining the currency's rally. The outlook remains positive, with room for further strengthening in the rand and opportunities for strategic investment decisions in the evolving economic climate.