The rand could be between R18.37 and R19 against the dollar by the end of 2016, Peter Attard Montalto, emerging markets economist at Nomura, said on Friday.
This is an adjustment of Nomura's previous expectation of the rand at R16 to the dollar by the end of 2016.
The key factor regarding the rand remains what he calls "the negative narrative" against the backdrop of the country facing a downgrade, a widening current account deficit, capital flight and looming rate hikes in the US and China.
His analyses indicate that emerging market currencies are likely to underperform against the dollar in 2016 as a whole and that the rand, on top of that, is expected to underperform against its peers.
"We are in uncharted territory here. While forecasting foreign exchange is a constant challenge, it is doubly so when the currency is beyond all-time weak levels in nominal terms," cautioned Montalto.
"We pencil in R20 to the dollar for the end of 2017 on the assumption that most of the domestic story will be out of the way by then."
He said Nomura would be willing to adjust this figure down if the SA Reserve Bank implements interest rate hikes at a faster pace and if there were positive political and growth policy developments or a meaningful shift in the downgrade narrative.
"We would revise it up on acceleration in the downgrade narrative, political dislocation, additional terms of trade pressures, a China hard landing or a much faster-than-expected Fed hiking," he said.
For Montalto there are certain key drivers for the rand in 2016 that makes it "so unpredictable and liquidity dependent".
These include capital outflows from local retail investors utilising their offshore limits and outflows of local institutional money.
"We expect to see slow, orderly grinding outflows from foreigners as the US hikes and the domestic junk downgrade story progresses," said Montalto.
Other key drivers adding to unpredictability of the rand for him would be Sarb rate hike decisions because of the drought and a higher core inflation. Then there is the possibility of some fast money inflows at some point in the year.
The last of the key drivers of unpredictability for him is the widening current account deficit throughout the year and foreign direct investment outflows as domestic private sector investment is directed offshore - especially to the rest of Africa.
"All of these suggest a steady, but orderly weakening of the rand, with the question being about its levels," said Montalto.
Meanwhile the World Bank said earlier this week that growth in sub-Saharan Africa is forecast to accelerate to 4.2% in 2016 from 3.4% in 2015 as commodity prices stabilise.
It added that economic activity will vary across the region, with consumption growth remaining weak in oil exporting countries as fuel costs rise, while lower inflation in oil importing countries helps to boost consumer spending.
Nigeria is forecast to expand 4.6% after growing by 3.3% last year, while South Africa is expected to advance only modestly to 1.4% growth from 1.3% in 2015.
In November Sarb forecast that SA's gross domestic product will grow at 1.5% in 2016 and 2.1% in 2017.