USD/ZAR: Cautious of further downside ahead for the rand - CIBC
|The US dollar gained 15% against the South African rand over the last thirty days. Despite the mentioned rally, analysts at CIBC warn the ZAR could drop further.
Key Quotes:
“Foreign purchases of South African bonds have materially retreated over the last month. The long-term correlation between USD/ZAR and the one-year moving average in bond purchases highlights ongoing ZAR negativity. The drop in oil prices, even in Rand terms, should prove supportive for domestic industry. However, the decrease in demand, allied to ongoing power-related issues and load shedding, remains a drag upon activity.”
“Given that the country has little fiscal capacity, the focus remains on the SARB. Expect rates to be further eased towards the GFC crisis lows at 5.00%, despite the capitulation in the ZAR and risks stemming from imported inflationary influences.”
“Domestic investors are fleeing asset markets, as they begin to prefer holding cash, and foreign investors are likely to continue doing the same, until there is clarity surrounding the extent and duration of macro negativity.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.