At the beginning of a new week of potentially volatile trading the South African rand is the weakest link due to Moody’s stripping the country from its last remaining investment grade, economists at Rabobank apprise. USD/ZAR trades at 17.949.
Key quotes
“South Africa was downgraded to junk and the negative outlook was retained. Moody’s justified its long overdue decision by the persistent deterioration in fiscal strength and structurally weak growth.”
“Based on that our forecast of a peak for USD/ZAR at 18.00 over the 3 month horizon does seem too conservative, but we take into consideration the possibility of a sharp pullback before another leg higher unfolds.”
“In current highly unpredictable times it is not necessary about specific targets/forecasts, but about the direction of the trade which in case of USD/ZAR is skewed to the upside.”
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