Rand Remains Under Pressure As Energy Crisis Bites

Spot USD/ZAR trades above neutral levels, with BBDXY gyrations feeding into the pair's price action. The South African Rand has been a clear underperformer in the EMEA space this week. The rate last deals at ZAR17.2960, up ~195 pips on the day, with bulls looking for a clearance of Jan 6 high of ZAR17.4343.

• From a cross-asset perspective, local-currency bond yields have crept higher this morning, with 10-year breakeven inflation rate last seen at 6.13%. The local equity benchmark printed new all-time highs before trimming the bulk of initial gains. The commodity complex is slightly firmer, with BBG precious metals subindex operating near cyclical highs.
• Global recession risks and domestic energy crisis keep the ZAR under pressure, with no near-term solutions to the ongoing power outages in sight. Recent press reports indicate that the discontent with the government's actions on the energy front is growing, with a number of actors threatening legal action.
• Reminder that the SARB will announce its monetary policy decision next Thursday. Consensus is split between a 25bp and 50bp hike, with most analysts in BBG survey leaning towards a half-point increase, albeit price action of FRA contracts suggests that the beginning of the year has seen slight dovish repricing.