USD/ZAR likely to trade around 14.00 by year-end, says Commerzbank

The USD/ZAR is expected to trade around levels of 14.00 by the end of this year, according to reports from the Commerzbank. The rand has been under depreciation pressure since early September and for the first time in four months, USD-ZAR yesterday touched the 13.70-mark before the pair closed around 13.55.

At the beginning of the month, USD-ZAR had still been trading below 13. What was decisive was the continued hawkish attitude on the part of the Fed recently which also put pressure on other EM currencies. That would mean that the fate of the EM currencies is beginning to turn, as they have been benefitting from the scepticism towards the Fed outlook and risk-on sentiment since the start of the year.

However, so far the depreciation trend in ZAR is moderate. This is likely to be due in part to the South African central bank (SARB) as it is seen as the (only) guarantor for stability orientated policies by the market and investors. Following a surprise rate cut in May, it left its key rate unchanged on September 21, least due to the rand. It is hardly a coincidence that governor Kganyago will be speaking at the der Bank of England conference on the independence of central banks.

He is unlikely to comment on monetary policy. On the domestic front, today’s budget figures might provide some momentum for the market. Even though it is not expected that the disappointing July figures will be corrected, but if the data is worse than expected this is likely to put additional pressure on the rand.

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