AUD/ZAR Outlook: The outlook is slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows, with limited clear catalysts.
Key drivers:
• Rate gap: The Reserve Bank of Australia's stance on potential rate hikes contrasts with the South African Reserve Bank's recent interest rate cut, making AUD less attractive compared to ZAR.
• Risk/commodities: The appreciation of the rand against the US dollar is bolstered by a surge in precious metals, which enhances demand for ZAR.
• One macro factor: The improvement in South Africa's economic fundamentals has led to increasing foreign investments in rand-denominated assets, supporting the currency.
Range: AUD/ZAR is expected to hold within its recent range as market dynamics stabilize.
What could change it:
• Upside risk: A surprise interest rate hike from the Reserve Bank of Australia could strengthen the AUD.
• Downside risk: Renewed global market volatility could lead to further weakening of the AUD against the ZAR.