South African Rand Catches Breather Ahead Of Fed Monetary Policy Decision

Spot USD/ZAR has extended losses, clinging to the coattails of the BBDXY index, with both operating close to their respective session lows. The South African Rand is the second-best performer in the EMEA space, getting some reprieve after the recent spell of its weakness. On the YtD basis, the Rand remains the worst performer in the EMEA basket.

• The greenback trades on the defensive ahead of today's monetary policy decision from the FOMC. Consensus looks for a 25bp rate hike from U.S. policymakers, which would match the magnitude of the increase in rates delivered last week by the SARB.
• Positive risk sentiment might be lending some further support to the ZAR, even as the composite BBG Commodity Index and the precious metals subindex stay continue to operate below neutral levels.
• South Africa's 10-year breakeven inflation rate is testing one-year lows at 5.83%, with local-currency bond yields stabilising at depressed levels.
• The imminent Cabinet reshuffle continues to draw attention, with President Ramaphosa facing the task of bringing government roles into line with party roles in the wake of the ANC's recent elective conference, as per the local convention.
• Spot USD/ZAR trades at ZAR17.3140, down ~940 pips on the session, with bears taking aim at Jan 12 low of ZAR16.6950.