Global Markets Slide as AI, Crypto, and Precious Metals Face Heightened Volatility 
Trump Signs Executive Order Threatening 25% Tariffs on Countries Trading With Iran 
U.S.-India Trade Framework Signals Major Shift in Tariffs, Energy, and Supply Chains 
Gold and Silver Prices Rebound After Volatile Week Triggered by Fed Nomination 
Vietnam’s Trade Surplus With US Jumps as Exports Surge and China Imports Hit Record 
Oil Prices Slide on US-Iran Talks, Dollar Strength and Profit-Taking Pressure 
Asian Stocks Slip as Tech Rout Deepens, Japan Steadies Ahead of Election 
Silver Prices Plunge in Asian Trade as Dollar Strength Triggers Fresh Precious Metals Sell-Off 
Dollar Steadies Ahead of ECB and BoE Decisions as Markets Turn Risk-Off 
BTC Flat at $89,300 Despite $1.02B ETF Exodus — Buy the Dip Toward $107K? 
Notwithstanding the ongoing debate regarding the timing of the next US rate hike, the case for emerging markets remains intact, the next FOMC rate hike will not occur until Q1 2017.
DXY is down 3% over the past month and almost 5% this year, which is implicitly helping emerging market currencies.
South African rand has been the best performer among EMFX space, appreciating over 9% versus the USD.
We maintain EM positive FX portfolio against dollar intact in medium terms. The trading portfolio has short dollar positions (against IDR and ZAR) and RV carry trades (short MYR-IDR) while our longer-term carries trades include short AUDMXN and short SGDINR and short SGDCAD. Some pairs have moved a lot and are tactically stretched, which is a risk to near-term price action.
Current bout of EM FX consolidation is opportunity to re-enter Following an intense rally since May, markets are seeing some profit-taking in ZAR, particularly ahead of Fed Chair Janet Yellen’s speech at the Jackson Hole Policy Symposium on August 26, 2016, where we believe that she may attempt to prepare the markets for an FOMC interest rate hike over the coming months.
As a result, ZAR has been gaining to outstandingly by the impact of a more dovish FED and higher commodity prices.
In addition, SARB’s monetary policy would stay behind a solid anchor. FX implied yields and real rates remain attractive to investors, both in absolute terms and relative to peers.
Over the medium term, we see ZAR strengthening, as the ZAR is fundamentally undervalued after years of weakening. As a result, we forecast the USDZAR continue to gain in the short run, but to trade slightly around 12.4912 in 1M.
