Bias: Bearish-to-range-bound, as the USD is currently below the 90-day average and within the lower half of the 3-month range.
Key drivers:
- Rate gap: The Federal Reserve is approaching rate cuts while the South African Reserve Bank has recently lowered its key rate, attracting more investment into the ZAR.
- Risk/commodities: Rising oil prices contribute to ZAR strength, given South Africa's reliance on commodities, making the rand more attractive.
- Macro factor: Strong interest in rand-denominated bonds is notable, driven by improving economic fundamentals and higher yields.
Range: USD/ZAR may hold around current levels within the recent 3-month range as it experiences limited movement.
What could change it:
- Upside risk: An unexpected hawkish stance from Fed policymakers could boost demand for the USD.
- Downside risk: Further increases in global risk appetite, alongside a rally in commodities, could reinforce the ZAR's strength against the USD.