NZD/ZAR Outlook: Slightly positive, but likely to move sideways, as the rate is above its recent average but lacks a clear driver for a significant move.
Key drivers:
- Rate gap: The Reserve Bank of New Zealand is expected to tighten policy in response to rising inflation, contrasting with anticipated interest rate cuts by South Africa's central bank, which may weigh on the rand.
- Risk/commodities: Rising oil prices could support the South African rand due to increased investor interest in commodity-driven currencies, but this could be offset by domestic economic concerns.
- One macro factor: Decreasing inflation in South Africa, now below the central bank’s target, suggests less urgency for rate increases, which could limit rand strength.
Range: Expect the NZD/ZAR to drift within its recent range as external factors provide mixed signals.
What could change it:
- Upside risk: A stronger-than-expected economic performance in New Zealand could spur further NZD gains.
- Downside risk: Any unexpected developments from the Reserve Bank of South Africa, particularly in monetary policy, could weaken the rand significantly.
