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  • USD/ZAR drops further and approaches 15.00.
  • South Africa CPI rose 0.3% MoM in October.
  • Global stimulus keeps supporting ZAR and rest of EM FX.

The South African rand extends its monthly gains and drags USD/ZAR to new 9-month lows in the vicinity of the 15.00 mark on Wednesday.

USD/ZAR offered post-SARB decision

After bottoming out in the proximity of the 15.10 level earlier in the session, USD/ZAR managed to regain some upside traction, particularly after the October’s inflation figures surpassed expectations in October.

Indeed, headline consumer prices in South Africa rose 0.3% MoM during last month and 3.3% from a year earlier, while prices excluding food and energy costs ticked higher by 0.2% on monthly basis and 3.4% over the last twelve months.

The rand saw its upside pressure accelerated as of late in response to the improved sentiment around precious metals, while the generalized flows into the EM FX space on the back of global stimulus unleashed by central banks in order to fight the pandemic also collaborates with the momentum.

The better tone in ZAR comes despite the South African central bank (SARB) kept its policy rate unchanged at 3.5% at its meeting last week and hinted at the possibility of further easing in the next months. The SARB also revised lower its prospects for inflation and sees the 2020 GDP contracting 8.0%.

USD/ZAR levels to consider

As of writing spot is gaining 0.38% at 15.2543 and a break above 15.5819 (weekly high Nov.19) would open the door to 15.7331 (high Nov.12) and finally 15.9969 (61.8% Fibo of the January-April rally). On the downside, the next support is located at 15.1292 (monthly low Nov.25) seconded by 15.0884 (78.6% Fibo of the January-April rally) and then 13.9311 (2020 low Jan.2).