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Rand Extends Gains, USD/ZAR Risk Reversals Ease

ZAR

Spot USD/ZAR suffers further losses after closing below its 50-EMA yesterday. The rand has now fully recouped losses incurred on the back of South Africa's diplomatic tensions with the US. The rate last deals at ZAR18.7563, down almost 800 pips on the day, with bears looking for continued losses past May 2 high of ZAR18.5075. Conversely, Jun 1 high of ZAR19.9204 remains the key near-term bullish target.

  • The move lower in the spot rate has been paralleled by dowswings in USD/ZAR risk reversals, as option traders revise their bets. One-month tenor posted another sharp drop yesterday, extending the move this morning.
  • Local-currency bonds trade on the back foot this morning, correcting their recent gains. The commodity space is fairly stable, with the precious metals index operating near unchanged levels.
  • The government is yet to decide any decision surrounding the upcoming BRICS summit and Russian President Putin's participation. The latest Cabinet meeting brought no fresh updates on the matter.

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