Rand Extends Gains Amid Risk-On Sentiment, Firmer Precious Metals

A round of weaker than expected U.S. macroeconomic data has helped spot USD/ZAR lose some altitude and print new session lows. The pair last trades at ZAR16.8900, down ~1,590 pips on the day, with bears setting their sights on Jan 12 low of ZAR16.6950.

• Domestic data took focus earlier in the day, with CPI missing consensus forecasts and retail sales proving better than expected. Participants pared SARB rate-hike bets into morning hours, even before the data crossed the wires, as suggested by the tightening in FRA 1x4 vs. 3-Month JIBAR spread. The central bank will announce its next monetary policy decision on January 26.
• Local-currency bonds keep strengthening, with yields last seen 10.7-17.4bp lower, as the curve has bull steepened. South Africa's 10-year breakeven inflation rate has extended losses and last sits at 6.06%.
• The commodity complex remains strong, with the precious metals subindex hitting new eight-month highs as it last changes hands ~1% better off. Gold keeps garnering strength and is now operating near session highs.