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Rand On Defensive With Plenty Of Risk This Week

ZAR

The Rand is the worst performer in the EMEA space owing to its high-beta status, with plenty of risk ahead. The global economic calendar features a number of central bank decisions, South Africa will publish key CPI data, while the Phala Phala saga will remain front and centre amid a parliamentary debate on the matter and the ANC's national elective conference.

  • The deepening energy crisis exposes the Rand to further losses, with the energy utility announcing Stage 5 load-shedding until further notice, despite earlier plans to de-escalate power outages. The City of Johannesburg asked for a three-day exemption from blackouts to stabilise electricity supply.
  • USD/ZAR implied volatilities are elevated, with one-week tenor last seen at 21.24%. One-month implied volatility has now bounced off levels printed after it unwound Phala Phala gains. Overnight implied vol has surged towards recent highs.
  • Spot USD/ZAR deals at ZAR17.4635, up ~1,090 pips on the session, with familiar technical levels still in play. The pair gains for the second consecutive trading day after charting a Doji candlestick on Dec 8.

Fig. 1: USD/ZAR Overnight vs. 1-Week Implied Volatilities

Source: MNI - Market News/Bloomberg

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