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ZAR Slips Further, With Breakevens Finding Bottom

SOUTH AFRICA
  • ZAR remains weaker on the day, with USD/ZAR looking for a clear break of the 50-dma at 16.4797 - a level that's been flirted with since the beginning of the week. A close above this mark would open further gains toward the early August highs of 16.9441 and - ultimately - the cycle best at 17.3060 posted in mid-July.
  • Break-even inflation rates remain a key driver for FX, with USD/ZAR's uptick this week mimicking the recovery in 10y breakeven rates, which bottomed out at 6.31% at the tail-end of last week.
  • The bounce off the lows in USD/ZAR comes as the oil-induced ZAR rally runs out of steam, with front-end vols also finding bottom. 1m implied volatility is higher today, having printed a new multi-month low of 14.7175 points earlier this week.
  • Retail sales fell 0.4% on a M/M basis vs. Exp. -0.2%, with Y/Y sales dropping 2.5% against forecast -0.1%.

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