USD/ZAR to spike toward 18.00 on intensified US-China tensions – Rabobank


Economists at Rabobank notes how the rand has been a major beneficiary of the revival of carry trade. Nonetheless, they expect the USD/ZAR pair to escalate towards 18.00 when Sino-American tensions flare up.

Key quotes

“A relatively attractive carry trade cannot be the source of sustainable gains over the long-term horizon. It has to be supported by solid economic fundamentals, which South Africa currently lacks. Therefore, the rand is purely at the mercy of speculative flows which can change direction overnight. To adopt a positive long-term view on the rand the Ramaphosa administration would have to make substantial progress in addressing structural fiscal issues.” 

“While Finance Minister Mboweni remains fully determined to prevent the worst-case scenario of South Africa plunging into a debt spiral, he does not seem to have sufficient support amongst the ANC lawmakers to approve unpopular reforms. Mboweni’s determination is unlikely to provide the rand with enough insulation if the external backdrop worsens and the dollar appreciates.”

“We expect USD/ZAR to spike again to around 18.00 in the coming months when tensions between the US and China (and China vs other countries) are likely to escalate further. The markets may also end up disappointed with the pace of global recovery as various countries have been forced to reintroduce restrictions due to a spike in new coronavirus cases.”

 

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.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD extends gains as ADP NFP disappoints with only 167K

EUR/USD is trading above 1.1850, extending its gains after ADP's private-sector report badly misses expectations with an increase of only 167,000 jobs in July. The greenback had already been falling with yields.

EUR/USD News

XAU/USD bulls unstoppable, renews life-time highs near $2040

With ‘buy the dips’ emerging as the main underlying theme behind the gold price action so far this week, the bulls flex their muscles further to record fresh all-time highs near $2040.

Gold News

GBP/USD trades well above 1.31 amid dollar weakness

GBP/USD is advancing towards this month high at 1.3169, recovering as the dollar retreats. The UK government is under scrutiny for its management of the virus crisis. US Services PMIs are eyed. The ADP NFP missed with 167K.

GBP/USD News

ETH/BTC on retreat, BTC recovery gains traction

ETH/BTC has topped at $0.03528 on Tuesday and retreated to $0.03448 by the time of writing. The cross has lost about 1% since the start of the day. The RSI on a daily chart reversed to the downside, signaling that the price is ready for a correction from overbought territory.

Read more

WTI hits fresh two-week highs near $42.50 ahead of EIA data

WTI (futures on Nymex) extends its winning-streak into the third straight day on Wednesday, as the bulls challenge the July high of $42.51.

Oil News

Forex MAJORS

Cryptocurrencies

Signatures