ZAR/USD Outlook:
Likely to increase, as the ZAR remains above its recent average and is supported by strong global demand for exports.
Key drivers:
- Rate gap: The South African Reserve Bank has maintained high interest rates, while the Federal Reserve's dovish stance has weakened the USD, benefiting the ZAR.
- Risk/commodities: Strong demand for commodities such as gold and platinum has increased foreign earnings, boosting the rand's value.
- Macroeconomic factor: The formation of a centrist Government of National Unity in South Africa has improved political stability, enhancing investor confidence in the rand.
Range:
The ZAR/USD is expected to test extremes within its recent 3-month range, likely holding around higher levels.
What could change it:
- Upside risk: A significant drop in U.S. Treasury yields could further weaken the dollar.
- Downside risk: Heightened geopolitical tensions could lead to a renewed sell-off of U.S. assets, putting downward pressure on the USD.