ZAR is attempting to stage a relief rally that could extend further in the week ahead – MUFG

The worst-performing EMEA currency over the past week was once again the ZAR. Economists at MUFG Bank believe that the Rand could stage a relief rally this week.

Domestic factors contributing to ZAR underperformance

“The latest trigger for the deeper ZAR sell-off last week were heightened fears that geopolitical tensions between South Africa and the US could escalate significantly. It followed comments from a US ambassador stating that South Africa supplied arms to Russia. South African Finance Minister Godongwana has since claimed that the diplomatic row has been resolved, and it is unlikely to result in the US imposing penalties such as sanctions.”

“The ZAR is attempting to stage a relief rally that could extend further in the week ahead although other domestic concerns such as ongoing energy supply disruptions and the paring back of China reopening optimism are acting as a dampener on upside potential.”