Rand Claws Back Some Of Earlier Losses After Refreshing Record Lows

USD/ZAR has come under pressure after hitting new all-time highs (ZAR19.8672) earlier in the session. The rate has now unwound the bulk of its initial gains thanks to a dissipation of wider greenback strength and South African DIRCO's clarification that the diplomatic immunities granted to the participants of the upcoming BRICS events "do not override any warrant that may have been issued by any international tribunal against any attendee of the conference."

• When this is being typed, spot USD/ZAR trades at ZAR19.7403, up ~730 pips on the session. The pair's risk reversals have eased somewhat, albeit they remain in the vicinity of recent cyclical highs, as participants see notable risk of further rand weakness.
• South Africa's budget deficit widened to ZAR67.5bn in April, which was reasonably close to the median estimate of ZAR67.0bn. This comes after a ZAR46.1bn deficit registered in March.
• Apart from domestic developments, China's May PMI figures will be watched in the coming days, with participants assessing the momentum behind the economic recovery of the top buyer of South African commodities.