According to analysts from TDS, the decline in USD/ZAR, after the FED and the South African Reserve Bank (SARB) decision, could be an opportunity to re-establish long positions.
“The SARB hiked the repo rate by 25bp to 7.00% in a split decision that was all but easy to call. The consensus was split between hold and hike, while we have been inclined towards thinking that the SARB would hold.”
“Of the two main reasons for a hike, inflation has continued to dominate over other considerations such as the downside risks to growth. The second reason was to put a backstop against possible further deterioration in market sentiment.”
“We see risks tilted towards further hikes in 2016, although the scope for more tightening is limited. ZAR has been the best performing EMFX today, also aided by the dovish Fed yesterday.”
“When the dust settles, however, idiosyncratic risks will resurface. We remain bearish on ZAR and look at its rally today as a good opportunity to gradually reestablish long USDZAR positions.”
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