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ZAR: USDZAR Extends Session Gains, But Focus Still on 17.00

ZAR
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USDZAR initially showed limited reaction to the August trade figures, which posted a much smaller surplus than had been expected (ZAR5.6bn vs. ZAR19.1bn est.), but has since extended gains to 0.6%. Profit taking dynamics were potentially at play following the test of 17.00 earlier today, with weakness in spot gold (-0.75%) likely providing an additional headwind to the rand.

  • More broadly, the impressive rally for ZAR this quarter puts its spot gains versus USD at an impressive +2.3% on a month-to-date basis, far greater than the next best performing EMEA currency (ISK: +1.3%). Positive sentiment towards South African assets has been reflected in both local equity and bond markets as well - the JALSH hit a fresh all-time high last week (up +14% YTD) while yields on 10y SAGBs briefly traded below 10% for the first time since April 2022 today.
  • Goldman Sachs note that they are bullish on SAGBs, as they think yields can gradually grind lower over time as authorities restore fiscal credibility. They note that the coalition government reduces the risk of fiscal underperformance.
  • For USDZAR, the pair traded to as low as 17.0356 at the start of the European session – a fresh cycle low – where it narrowed the gap to support at the 17.00 handle. A break here would reinforce bearish momentum, setting sights on 16.8724, the Jan 18 ‘23 low.
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USDZAR initially showed limited reaction to the August trade figures, which posted a much smaller surplus than had been expected (ZAR5.6bn vs. ZAR19.1bn est.), but has since extended gains to 0.6%. Profit taking dynamics were potentially at play following the test of 17.00 earlier today, with weakness in spot gold (-0.75%) likely providing an additional headwind to the rand.

  • More broadly, the impressive rally for ZAR this quarter puts its spot gains versus USD at an impressive +2.3% on a month-to-date basis, far greater than the next best performing EMEA currency (ISK: +1.3%). Positive sentiment towards South African assets has been reflected in both local equity and bond markets as well - the JALSH hit a fresh all-time high last week (up +14% YTD) while yields on 10y SAGBs briefly traded below 10% for the first time since April 2022 today.
  • Goldman Sachs note that they are bullish on SAGBs, as they think yields can gradually grind lower over time as authorities restore fiscal credibility. They note that the coalition government reduces the risk of fiscal underperformance.
  • For USDZAR, the pair traded to as low as 17.0356 at the start of the European session – a fresh cycle low – where it narrowed the gap to support at the 17.00 handle. A break here would reinforce bearish momentum, setting sights on 16.8724, the Jan 18 ‘23 low.