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ZAR: Rand Builds On Recent Gains, USD/ZAR Approaches Lower End Of Trading Range

ZAR
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Spot USD/ZAR goes offered for the fourth consecutive day and is approaching recent cyclical lows printed at 17.5965 (Aug 30). The rate last deals at 17.6525, nearly 700 pips shy of neutral levels, with bears looking for losses towards Jul 28, 2023 low of 17.5713 and Jul 27, 2023 low of 17.4193. Initial resistance is at 18.0210, the 50-EMA.

  • SAGB yields have declined across the curve as the new week gets underway. South African 5-year breakeven inflation rate has dipped to 4.37%, below the SARB's inflation target mid-point of +4.5% Y/Y. 10-year breakeven inflation rate has dropped to 5.41%, briefly hitting its lowest levels since Feb 2021.
  • The SARB is expected to cut interest rates by 25bp this Thursday, during a meeting held the day after the Fed's rate decision and the release of South Africa's Aug CPI data. The 3-month JIBAR/1x4 FRA spread has marginally widened to 28.9bp, with a quarter-point rate cut fully priced in.
  • The composite BBG Commodity Index is little changed on the day; the precious metals subindex is also close to neutral levels, despite refreshing cyclical highs this morning.
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Spot USD/ZAR goes offered for the fourth consecutive day and is approaching recent cyclical lows printed at 17.5965 (Aug 30). The rate last deals at 17.6525, nearly 700 pips shy of neutral levels, with bears looking for losses towards Jul 28, 2023 low of 17.5713 and Jul 27, 2023 low of 17.4193. Initial resistance is at 18.0210, the 50-EMA.

  • SAGB yields have declined across the curve as the new week gets underway. South African 5-year breakeven inflation rate has dipped to 4.37%, below the SARB's inflation target mid-point of +4.5% Y/Y. 10-year breakeven inflation rate has dropped to 5.41%, briefly hitting its lowest levels since Feb 2021.
  • The SARB is expected to cut interest rates by 25bp this Thursday, during a meeting held the day after the Fed's rate decision and the release of South Africa's Aug CPI data. The 3-month JIBAR/1x4 FRA spread has marginally widened to 28.9bp, with a quarter-point rate cut fully priced in.
  • The composite BBG Commodity Index is little changed on the day; the precious metals subindex is also close to neutral levels, despite refreshing cyclical highs this morning.