USDZAR Trades at Fresh Multi-Month High with SARB in Focus

The rand continues to underperform in the EMEA space despite lower US yields and stronger US and European equity benchmarks evidence of the more benign attitude toward risk at the start of the week. Weakness in China equities, potentially due to the lack of movement in the latest round of Chinese LPR fixings given the well-documented economic worry, may be accounting for rand underperformance. The move higher in USDZAR today has resulted in resistance at 19.1386, the Dec 11 high, being pierced. A more sustained break of this level could strengthen a bullish theme and signal scope for a climb towards 19.6399, the Oct 6 high.

• Citi Global Markets have noted that they are long USDZAR "due to possible rise of credit risk and fiscal concerns again ahead of the budget" scheduled for Feb 21. They warn that "the Transnet and Eskom situation already remains tricky, and the risk is if the situation worsens, the export sector could be hit even harder".
• The focus in South Africa turns to inflation data and the SARB rate decision. December CPI will cross the wires Wednesday with Governor Kganyago's presser due Thursday. No change to interest rates are expected at this meeting, with sell-side broadly expecting easing to begin in Q3.