South Africa Breaking News: USD/ZAR falls to support, SARB keeps rates unchanged

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USD/ZAR Talking Points:

  • USD/ZAR dismisses South Africa’s interest rate decision
  • Evergrande remains a key threat to Emerging Market (EM) currencies including the volatile South African Rand
  • SARB (South African Reserve Bank) holds off on rate hikes as unemployment remains at historical highs

South Africa Repo Rate Remains Unchanged at 3.5%

The South African Reserve Bank (SARB) has kept the repo rate unchanged at the record low level of 3.5% despite fears of rising inflation. With yesterday’s CPI (consumer price index) print coming in at 4.9%, figures remain within the current target range of 3 – 6%.

South Africa Breaking News: USD/ZAR falls to support, SARB keeps rates unchanged

With South Africa’s vaccine rollout program lagging behind, stringent lockdowns combined with political unrest have continued to weigh on the volatile Rand. However, as economic activity gains traction, unemployment remains at all-time highs of approximately 34%, placing tax payers under an immense amount of pressure.

Although commodity prices have kept the South African economy afloat throughout the quarter, the collapse of China’s property developer Evergrande and supply constraints remain key catalysts that will likely affect both Rand strength and further rate hikes for the rest of the year.

USD/ZAR Price Outlook

At the time of writing, USD/ZAR is trading between key Fibonacci retracement levels of the August – September move which continues to provide support and resistance for the imminent move.

After breaking above the 38.2% retracement of the above mentioned move at 14.62 earlier this week prices continued to rise with the collapse of Evergrande weighing heavily on commodity prices, key resources for the SA economy.

But as the rally lost momentum, Dollar weakness boosted demand for EM currencies which are likely to remain bound by risk-sentiment.

USDZAR Daily Chart

Chart prepared by Tammy Da Costa using TradingView

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

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