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USDZAR Partially Recovers From Post-Budget Lows

While USDZAR has reversed roughly half of the post-budget sell-off, yields on SAGBs still sit approximately 11-13bps lower across the curve. The finance ministry’s tapping of gold and foreign exchange reserves was the highlight of the budget, as it will allow the government to decrease the amount of debt auctioned at its weekly sales, providing some relief to the local bond markets.
  • 10y yields reached a low of 11.505% and have fully erased the Feb 12 upleg. Similarly, 5y CDS have erased most of the early February widening, highlighting the positive post-budget investor sentiment - broad market expectation was for Godongwana to acknowledge notable fiscal slippage relative to targets outlined in his November MTBPS.
  • For USDZAR, while initial support at 18.8004, the Feb 13 low, was briefly pierced, a clear break of this level is needed to signal scope for an extension lower toward key support at 18.5578, the Feb 2 low. It is worth noting that today’s lows also closely match a cluster of moving average levels (50-, 100- and 200-DMAs).

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