Rand Sell-Off Loses Pace Ahead Of ZAR19.00 Figure, Local Data Eyed Today

USD/ZAR keeps pushing higher after a sharp rally over the past two days, which brings the ZAR19.00 figure into view, albeit its rally has lost its earlier momentum. The rate last deals at ZAR18.9162, up ~450 pips on the session, with bulls setting their sights on the aforementioned psychological resistance. Our technical analyst flags that bears eye May 2 high of ZAR18.5075 for initial support.

• SARB Governor Kganyago's emphasis on the role of ZAR weakness in amplifying inflationary pressures draws attention to a potential negative feedback loop between the exchange rate and monetary policy. Further rand depreciation caused by idiosyncratic factors raises the risk of a delay to the end of the SARB's tightening cycle, which could in turn lend some support to the beleaguered currency. There was close alignment between upswings in USD/ZAR and South African 6x9 FRAs yesterday as FX developments took focus in the context of assessing the outlook for interest rates.
• The rand remains the worst EMEA performer on a weekly basis, despite sitting around the middle of the regional scoreboard today, as the pace of its prior sell-off moderates. Data on South Africa's mining and manufacturing production are eyed later in the day.
• The aggregate BBG Commodity Index has softened a tad (-0.3%) and the precious metals subindex has shed ~0.9%, which is a potential headwind for the ZAR.
• Local-currency bonds have regained poise, with 10-year breakeven inflation rate easing from a new cyclical high printed at 6.93% this morning.