Rand Stays Under Pressure, All-Time Lows In Sight

USD/ZAR has advanced today and last deals at ZAR19.4366, up 1,845 pips on the session. The rate is narrowing on ZAR19.5148, an all-time high printed last week. A break above there would open up the psychological ZAR20.00 figure. Conversely, bears need a return below May 2 high of ZAR18.5075 to get some initial reprieve.

• The rand is close to unwinding the reprieve rally staged on Monday as South Africa's Finance Minister played down potential for U.S. sanctions over the alleged weapons sale to Russia, which Pretoria continues to deny. Familiar headwinds for the South African currency return to the fore, including China growth concerns, the domestic energy crisis and potential for further diplomatic frictions over Russia.
• On the diplomatic front, local media reported that South Africa is exploring options to allow for Russian President Vladimir Putin's visit for a BRICS summit. On the energy front, Eskom warned that in the worst-case scenario South Africa could experience Stage 8 load-shedding amid heightened demand during the winter season.
• USD/ZAR 1-week implied volatility has jumped ahead of next Thursday's SARB monetary policy decisions, with the central bank expected to stick with its hawkish posture. That being said, the pair's implied volatility is yet to return to levels seen in the midst of the diplomatic crisis involving South Africa and the U.S.
• SAGB sell-off has lost steam and they trade within relatively tight ranges this morning, while the yield curve runs slightly steeper. South Africa's 10-year breakeven inflation rate sits at 7.12%.
• The composite BBG Commodity Index has shed ~0.5%, with the precious metals subindex also ~0.5% worse off.