ZAR: Rand Close to Multi-Month Highs as Weaker USD Aids Post-Election Recovery

A weaker dollar on the back of the US retail sales data provided additional downside momentum to USDZAR, which has extended the pullback from the June 6 high to nearly 5%. That places the pair back towards the mid-May low of 18.0290, a break of which would see the pair at its lowest level in 10-months. While USDZAR has moderately recovered from session lows, we still remain 0.75% lower overall.

• Apart from global factors which have aided the rand’s rally, markets have responded positively to political and coalition developments domestically, with focus now on the composition of President Ramaphosa's cabinet and the compromises each partner of the Government of National Unity is willing to make.
• Meanwhile, the rand has been significantly outperforming its EM peers over the past week as the currency remains insulated to election risk in Europe, triggered by the French snap election, and LatAm, where the sell-off in the Mexican peso following the presidential elections has hampered regional currencies.