THE rand is likely to end the year at around R9/$, economic research consultancy firm Capital Economics Africa economist Shilan Shah said in a research note on Monday.
This is lower than their earlier estimates for the rand to end 2013 at R8.70/$.
The rand dipped below R9/$ last week to its lowest level in more than three years amid investor worries over continued labour and social unrest and a widening current account deficit.
Mr Shah said these factors would likely keep the rand under pressure in the coming months and quarters.
"We would not be surprised to see the rand fall further in the near term, perhaps as far as 9.25/$," he said.
"This will keep inflation elevated in the first half of the year, and prevent the Reserve Bank from easing policy to support a weak economy."
Reserve Bank governor Gill Marcus said last week that more volatility could still be expected for the rand in the coming months.
Inflation as measured by the consumer price index (CPI) rose to 5.7% year-on-year in December.
Focusing on domestic growth, Capital Economics said that monthly data for South Africa suggested that after a sharp slowdown in the third quarter of last year, the economy continued to struggle in the fourth quarter.
They identified the latest Kagiso purchasing managers’ index (PMI), an indicator of manufacturing activity, which fell to 47.4 in December from 49.5 in November.
"In addition to this, continued labour unrest meant there was no discernible recovery in mining output in the latter part of last year," Mr Shah said.
While the economic research consultancy firm believed the chances of more interest rate cuts were limited, the possibility of inflation falling back into the targeted 3% to 6% range in the second quarter of next year left the door open for one more rate cut this year.
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