Potential wind change for South Africa's resilient rand
Nov 15 (Reuters) -Developments since Donald Trump's election win have shaped a marked depreciation in the rand versus the dollar and, despite its propensity for resilience, the outlook for the South African unit has darkened.
A 6.3% rally in USD/ZAR since Nov. 5 has carried the market above key resistance levels. On the daily chart, a long-term trend resistance line and the 200-day moving average have given way at 18.0467 and 18.2850, respectively. The weekly Ichimoku kijun line and 100-week moving average have also been breached this week.
Fears that U.S. inflation will rise in 2025 and that growth will remain strong, leading to a shallower Federal Reserve easing cycle, have already impacted negatively on the rand. The market is speculating on Trump policy changes from January that could include trade tariffs and tax cuts.
Commodity prices have fallen on fears of a trade war.Metals and minerals (the largest export market for SA) are down 1.4% m/m in November. The rand is both an emerging and a commodity currency.
Investor sentiment has also cooled as the focus returned to South Africa's wider budget deficits and rising debt levels. For the next fiscal year, according to the latest budget review, the government sees a budget deficit of 4.3% of gross domestic product, which is up from its previous forecast of 3.7%.
USD/ZAR could move into a higher range between 18.50 and 19.50 in early 2025. The market has averaged 18.20 so far this year.
For more click on FXBUZ
USD/ZAR daily candle chart: https://tmsnrt.rs/3O71hnz
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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