ZAR caught between China and commodities

The ZAR is a commodity currency with high sensitivity to China risks (as China is one of the major export markets), and the currency could weaken more in the near term. The underperformance of the economy this year with weak activity amid electricity shortages adds to the vulnerability of the ZAR. 

EM currencies with external and internal imbalances are likely to suffer most from the Fed normalisation of rates, says Nordea Bank. And South Africa's large current account deficit makes the ZAR one of the most exposed currencies. The deterioration of the terms of trade makes it harder for the economy to rebalance the external deficit, increasing the need for ZAR weakness as a channel of adjustment.