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Cost Of ZAR Shorts Continues to Rise

SOUTH AFRICA
  • Local curve seen flattening in the aftermath of the FOMC minutes with a notable repricing higher in the front end of the curve (2Y +17.9bp), while 10Y & 30Y yields track -4.2bp & -9.6bp lower.
  • 2Y currently trading at 4.321 after breaking the 4.20 level with next major resistance at 4.40.
  • USD/ZAR continues to track lower on USD weakness and continued firmer fixings for CNY. Slightly higher commodities also adding weight to the move below the bear trigger at 15.21.
  • Focus today is on PPI data expected to moderate slightly MoM at 0.2% vs 0.3% exp and print flat YoY at 2.5%.
  • Following yesterday's CPI print, another upside surprise may further vindicate the SARB's hold position on policy rates.
  • Notable to recent ZAR strength is the sustained rise in USD/ZAR 1Y basis swap spread which has risen 49.46% to 103.00 since the start of Nov (~104bp this week) - making it increasingly expensive to short ZAR.
  • Foreign inflows have also ticked up with net inflows on R17.9bn recorded this month.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News

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