ZAR: Looking Vulnerable, But Bad News Priced In
The South African rand's movements continue to be dictated by swings in global risk appetite, and specifically sentiment regarding the likelihood of the US Federal Reserve tapering its asset purchases. At present, emerging market (EM) and commodity currencies - including the rand - are on a losing streak amid growing expectations that the Fed will begin tapering in March 2014, a move which will result in a drying up of global investment flows into high-yielding EMs. However, as outlined below, we believe that the risks are largely priced into the rand already, and provided that key support at ZAR10.5000/US$ holds firm, the currency should continue to range-trade between ZAR9.7000-10.5000/US$ over the short term.
|Current Account Deficit Barely Covered|
|South Africa - Capital & Financial Account By Component and Current Account Deficit, % of GDP|