USD/ZAR: Rand’s sharp rebound in June is not sustainable – MUFG
|The Rand staged a sharp rebound in June. Economists at MUFG Bank analyze ZAR outlook.
Rand to remain weak
There was no clear fundamental trigger for the Rand rebound in June but the price action most likely reflects that weakness had overshot what was justified by fundamentals in May.
USD/ZAR was more than 2 standard deviations above our short-term valuation model estimate when it peaked at just below the 20.00 level in May. While Rand undervaluation has become less extreme, the ZAR continues to trade at weaker levels reflecting the less supportive external backdrop.
There has been a clear loss of confidence in the actions undertaken by domestic policymakers that are weighing heavily on the Rand and South African assets. Recent worrying developments include i) the decision by the Financial Action Task Force (FATF) to add South Africa to their gray list for increased monitoring given shortcomings in tackling illicit financial flows, ii) the worsening energy supply blackouts that are further dampening the outlook for growth, and iii) the supply of arms to Russia. We expect the Rand to remain weak.
USD/ZAR – Q3 2023 19.00 Q4 2023 19.50 Q1 2024 19.25 Q2 2024 19.75
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.