Exotics and the carry trade – ZAR

The South African Rand was the best-performing emerging market currency this month after the Mexican Peso and the Brazilian Real, supported by the highest real yields among developing countries and speculation that the South African Reserve Bank's record policy easing cycle may be coming to an end. The SARB have a policy announcement on interest rates later today (13:00 GMT) along with Consumer Confidence and the Unemployment data (currently officially in excess of 30% and much higher for younger job seekers).

With the possibility that the Federal Reserve will keep interest rates low in the future, the South African currency could continue to attract demand from investors borrowing Dollars to buy higher-yielding currencies, known as carry trades. The Rand has returned 4% in carry trades this month.

The South African Rand is testing a key defence level after four consecutive days that pushed it to its strongest level since mid-March. On Wednesday the currency surpassed 16.35 – breaching the 50.0% Fibonacci retracement of its April high to January low – after failing to break the level three times in the past three months. A sustained break below it could see the Rand targeting the 61.8% retracement followed by the 76.4% level.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.