USD/ZAR: Rand to get under further downside pressure for now – Commerzbank

The South African central bank (SARB) hiked its key rate by 75 bps to 6.25% last week. ZAR was certainly unable to maintain its earlier gains against USD. The evolution of the currency is key to the next steps of the central bank, economists at Commerzbank report.

SARB will initially continue its rate hike cycle

“We expect that the SARB will initially continue its rate hike cycle. At the last meeting this year, due in November, a further 50 bps rate step seems most likely to us. Based on three-month futures contracts the market seems to be expecting a little more than that.”

“Whether the step will be larger or smaller and how many there will be after that is likely to also depend on how the rand can hold its ground. In a more restrictive global rates environment and with depressed market sentiment we expect it to get under further downside pressure for now.”