Rand Falters Amid Gold Weakness, Political Jitters

Spot USD/ZAR refreshed its all-time highs, topping out at ZAR19.9204, as the rand repeated a recent pattern of sizeable selling into the European morning. There has been little in the way of domestic headlines that may have applied any notable pressure to the ZAR, with familiar themes still front and centre. An above-forecast reading of China's Caixin Manufacturing PMI failed to shield the rand.

• When this is being typed, USD/ZAR trades at ZAR19.8290, up 1,035 pips on the session. The key near-term bullish target is provided by the psychological ZAR20.00 figure. Conversely, bears look for a pullback under May 24 low of ZAR19.1352.
• China's Caixin Manufacturing PMI unexpectedly returned into expansionary territory. Any enthusiasm may have been moderated by a weak official PMI print earlier this week. Activity data from South Africa's top trading partner remain under close scrutiny in the context of external demand for the sub-Saharan nation's commodities.
• Near-term political angst might be amplifying the rand's volatility, which USD/ZAR implied overnight volatility shooting higher this morning. BRICS Foreign Ministers gather in Cape Town for a summit seen as a precursor to the leader's meeting slated for August. Communique from the summit will be closely watched amid the risk of further deterioration in South Africa's diplomatic relations with the West.
• The latest downleg for the rand was facilitated by a weakening in spot gold (-0.2%) which has weighed on the precious metals index (-0.5%).