USD/ZAR: Room for the South African Rand to play catch up with ongoing rally in EM FX – MUFG
|Analysts at MUFG Bank see the USD/ZAR moving to the downside over the next days. They point out the South African Rand has failed to strengthen alongside other Emerging Market currencies on the back of building optimism over a dovish Federal Reserve policy pivot and China’s economy reopening more fully this year.
Key quotes:
“The ZAR has underperformed recently after USD/ZAR failed to break below support from the 200-day moving average in the middle of this month. It leaves the ZAR as one of the worst performing (-1.0% vs. USD) EM currencies so far this year.”
“Investor sentiment towards the ZAR has been hit recently by heightened concerns over the negative impact on growth in South Africa from worsening energy supply restrictions, and speculation that an amendment to the central bank’s mandate is imminent. While we acknowledge these domestic risks, we believe that the ZAR’s valuation now appears more attractive and offers room for catch up strength alongside the ongoing rebound in emerging market currencies.”
“The main downside risks in the week ahead would be if the Fed and other major central banks provide a hawkish policy shock that disrupts financial markets and lifts US yields and the USD.”
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.