Rand Outperforms Amid Firm Corrective Pullback In USD/ZAR

The South African Rand is the best performer in the expanded list of 31 major currencies tracked by Bloomberg, even as familiar domestic risks have not abated. A favourable commodity backdrop might be supporting the current corrective pullback in USD/ZAR from its three-year highs, with gold showing strength over the past two days.

• Spot USD/ZAR pierced the floor of a channel drawn off Feb 2 low today and keeps testing that technical hurdle, but it has struggled to attack key support from Mar 3 low of ZAR18.0825 flagged by our technical analyst. The pair last deals at ZAR18.3170, around 2,500 pips or ~1.3% lower on the day.
• Heightened risk premium related to South Africa's ongoing electricity crisis is seemingly baked into the local currency, as the market shows limited reaction to headlines surrounding the matter. Fitch Ratings warned that South African banks face asset quality pressures stemming from load-shedding, which came after S&P Global Ratings revised South Africa's credit rating outlook to "stable" from "positive".