ZAR: Rangebound Now, Appreciation Later

The South African rand continues to range trade, with key resistance at ZAR7.2000/US$ and key support at ZAR8.0000/US$ unlikely to be tested over the near term. However, we do expect some mild volatility surrounding the July 22 interest rate decision from the South African Reserve Bank. At present, expectations in the financial markets are evenly split between a 'hold' and a 'cut'. If the repo rate is cut to 6.00% as we expect, the rand could briefly sell off to ZAR7.8000/US$, although we would then anticipate a swift retracement of losses since the fundamentals would have remained broadly unchanged.

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