A sharp fall in the ZAR was noticed after new finance ministers took over, but the currency has gained slowly. The ZAR started strengthening against US dollar in reaction to the Federal Reserve's rate hike.
Moreover, central bank of South Africa is likely to hike rates further, that will further support the ZAR.
"The rally is probably a relief that policy uncertainty has been removed and the market interpreting the Fed as slightly less hawkish. However, we think it is too early to assume a sustained rally and remain cautious in the short term on the ZAR due to domestic weaknesses. However, in H2 16 we might see some strengthening of the ZAR. Hence, we foresee USD/ZAR at 15.10 in 3M, 15.50 in 6M and 15.00 in 12M", states Dansek Bank in a research note.
