South Africa: It is too early to declare that USD/ZAR has peaked – Rabobank

The South African Reserve Bank (SARB) decided to act and cut rates by 100bps, per Rabobank. USD/ZAR is trading at 18.6185.

Key quotes

“The SARB slashed its policy rate by another 100bps to a record low of 4.25% at an emergency meeting held on Tuesday.”

“Before the extension was announced the SARB estimated the economy to contract by 2 to 4% this year. The central bank has now revised its forecast to -6.1% y/y.” 

“Any indication from the Ramaphosa administration that the IMF could be officially approached for financial aid would allow us to mark 19.3508 as the important top for USD/ZAR and seriously consider a sustainable reversal of the bullish trend.”

“A weaker rand makes local assets attractive and perhaps some opportunistic foreign investors have already started buying them. However, for the bias to shift to the downside in USD/ZAR, a sustainable wave of capital inflows is required.”