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ZAR Erases Week's Strength on Solid US Inflation

SOUTH AFRICA
  • Having outperformed from the off this week, ZAR strength has wholly reversed into the NY open, with the hotter-than-expected US inflation release unsurprisingly driving emerging markets currencies lower. USD/ZAR has been marked up to 17.3844 and through the Monday highs. The move is mimicked across the local yield curve, with 10y yields adding 8bps over the past 30 minutes or so.
  • Notably, CNH/ZAR has surged, putting the cross just shy of 2.4984. Progress through here opens 2.5185 resistance (the early September highs) and levels not seen since mid-July.
  • On US pricing, market is now pricing a 4.1% year-end rate, a new cycle high, implying 100bp total hikes in both Nov and Dec. Note in June, the highest dot was a lone 3.75-4.00% - none of the 18 dots was above 4%. There will likely be several this time.

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