USD/ZAR: Exotic traders closely following South Africa's conjecture: Downside pressure for the ZAR
Exotic traders are closely following the Rand this week as they are taking advantage of the volatility from political instability. USD/ZAR is currently being traded around 14.75410 and reached a 5-month low a couple of days ago. At the time of writing, the pair is heading towards the next resistance at 15.7375.
South African’s equities have also suffered from the current uncertainty within Ramaphosa’s cabinet, with investors’ sentiment worsening after some major banks announced their negative projections. Specifically, Deutsche Bank is short on ZAR since two weeks ago when they publicly announced their downside projections for the currency.
Ramaphosa, the current president, is struggling to apply his reformed agenda with investors fearing that the lack of policies will worsen the status quo of the economy. This week, the South African president had to delay the cabinet designation which impacted heavily the USD/ZAR. Ramaphosa does not have many options left at this point, if he wants to apply new political parameters, unity is needed.
Also, let's not forget that South Africa’s currency is highly correlated with Renmimbi’s price action, as China is one of its major commercial partners. So the ZAR is getting double pressure. As a whole, the ZAR is not the only currency negatively affecting the Emerging Market panorama, as many EM currencies are still suffering from the latest sanctions derived from the trade war.