Rand Underperforms In EMEA FX Space

Spot USD/ZAR has snapped a five-day losing streak and the rand is on track to finish the session as the worst EMEA performer amid concerns surrounding the possible consequences of the BRICS summit. Broader demand for the greenback and demand for USD/ZAR on its dip below 18.50 may have also conspired to support the pair's rebound. The rate last deals at 18.6590, almost 2,000 pips higher on the day.

• There is speculation that some of the rand's weakness today might be linked to the outcomes of the 15th BRICS summit, specifically the structure of the proposed expansion. The perception that the bloc could tilt towards illiberal states, such as Iran, and thus take a more anti-West orientation might be fuelling concerns over the ramifications for trade and investment relations with Western partners.
• As a reminder, the rand came under pressure earlier this year amid the "Russiagate" scandal, when US ambassador suggested that a sanctioned Russian vessel may have left a South African port loaded with weapons. A group of US lawmakers subsequently asked the White House to reconsider holding the next AGOA summit in South Africa and it took Pretoria much diplomatic effort to soothe tensions.
• From a cross-asset perspective, SABG yields sit lower across the steepened curve. The composite BBG Commodity Index sits ~0.2% lower on the day, while the precious metals subindex is little changed on the day.