Rand Remains On Defensive, 1-Week Implied Vol Climbs Ahead Of SARB Rate Review

Spot USD/ZAR has turned bid this morning, advancing for the fifth consecutive day. The South African Rand has been the worst EMEA performer this week and retains this status today, owing to it being a risk proxy and domestic headwinds related to the ongoing energy crisis.

• The rate last operates at ZAR17.2355, up ~1,290 pips on the session. From a technical standpoint, the next stop on the topside is Jan 6 high of ZAR17.4343. Conversely, bears look for losses past Jan 12 low of ZAR16.6950.
• USD/ZAR 1-week implied volatility crept higher today, as it now captures the next SARB rate review, due January 26. That said, it sits considerably below the levels printed as the Phala Phala scandal erupted in December.
• Below-forecast inflation data released Wednesday saw a slight reduction in SARB rate-hike pricing, with JP Morgan tweaking their forecast for next week's meeting to +25bp (prev. +50bp).
• The aggregate BBG Commodity Index trades ~0.4% at typing, albeit the precious metals subindex holds marginally above neutral levels.
• Local-currency bond yields have climbed across the curve. South Africa's 10-year breakeven inflation rate has retraced the bulk of yesterday's drop and last sits at 6.14%.