We saw a range of advanced economy currencies depreciate, including the Japanese yen and the euro, but a group of emerging market currencies, including the South African rand, seemed to be immune to the strong dollar. However, this trend suffered a breakdown in June. We are no longer in the space where we can have low policy rates without currency weakness.
There are too many other countries offering higher policy rates, and we are getting less support from export commodity prices than we did previously. Although exchange rate dynamics are always unpredictable, the SARB’s baseline forecast is that we are seeing some exchange rate pressure to inflation, but timely rate increases keep this from being a major source of pressure.