SOUTH AFRICA: ZAR Resilient to Broader Dollar Bid, MS on Terminal Rate
Sep-18 16:05
- With the SARB opting to maintain the policy rate at 7% today, the South African rand has traded with a resilient tone, unaffected by the broader relief rally for the dollar on Thursday.
- USDZAR traded to a fresh cycle low yesterday, confirming a resumption of the downtrend and maintaining the price sequence of lower lows and lower highs. Immediate sights are on 17.2212, the Oct 3 2024 low. Consumer confidence and PPI are the only domestic data points next week.
- Morgan Stanley will reassess their timing of the next rate cut (March 2026) if the currency remains firmer than the SARB's baseline (17.60 in 4Q25). Similarly, endorsement from National Treasury on a new target in the MTBPS would be important in facilitating sooner easing.
- Beyond the near term, MS maintain their view that the steady state terminal rate is materially lower than market pricing. A moderation in inflation expectations and central bank forecasts that remain in the vicinity of 3% are probably what the market needs to reassess its view.
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