USD/ZAR: Further rand gains to prove more challenging – MUFG

During August the South African rand strengthened marginally against the US dollar from 14.592 to 14.499. Looking ahead, ZAR’s strength is set to fade, in the opinion of economists at MUFG Bank.

See – USD/ZAR: Break above the 15.6645/15.6945 zone to trigger a rally – Commerzbank

Rand to be marginally stronger

“While the Fed has signalled that it plans to begin tapering QE later this year, it has provided reassurance that it is in no hurry to follow up by raising rates.”

“Domestic concerns that have weighed on the rand recently have also eased somewhat over the summer. Social tensions have eased following the worst rioting in July since the apartheid, although fears remain that tensions could resurface.”

“A further positive is that COVID-19 cases in South Africa have dropped by almost 50% from their July peak, but remain at elevated levels. 

“We expect the SARB to stick to their more cautious plans for only one rate hike later this year. Further rand gains should prove more challenging.”