ZAR18 Gives Way As Moody's Assessment Of S. Africa's Growth Risks Pressures Local Assets

Spot USD/ZAR has rallied above the psychological ZAR18 mark for the first time since early November, as South African assets sold off in reaction to Moody's comments on the downside risks to the country's growth prospects.

• The rate last deals at ZAR18.0730, up ~2,150 pips on the session. Bullish focus falls on the 76.4% retracement of the Oct 13 - Jan 12 downleg and a break here would open up Oct - Nov highs located within the ZAR18.5024-18.5815 zone. Bears initially look for losses past Feb 2 low of ZAR16.9317.
• Moody's warned that the impact of persistent load-shedding on consumer sentiment, business and investment will "weaken the country's already subdued economic growth prospects and threaten social and political stability."
• Separately, Absa sees South Africa's main budget deficit at 5.1%/GDP in 2023/24 on the back of above-forecast public-sector pay rise, further bailouts for state-owned companies, and aid measures amid the ongoing power crisis.
• Local-currency bond yields shot higher but have now eased off best levels. South Africa's 10-year breakeven inflation rate printed new four-week highs at 6.17% before moderating to 6.13%.
• The commodity complex is slightly weaker, last trades ~0.6% below neutral levels. The precious metals subindex is ~0.5% worse off.