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The US dollar gained 15% against the South African rand over the last thirty days. Despite the mentioned rally, analysts at CIBC warn the ZAR could drop further. 

Key Quotes: 

“Foreign purchases of South African bonds have materially retreated over the last month. The long-term correlation between USD/ZAR and the one-year moving average in bond purchases highlights ongoing ZAR negativity. The drop in oil prices, even in Rand terms, should prove supportive for domestic industry. However, the decrease in demand, allied to ongoing power-related issues and load shedding, remains a drag upon activity.”

“Given that the country has little fiscal capacity, the focus remains on the SARB. Expect rates to be further eased towards the GFC crisis lows at 5.00%, despite the capitulation in the ZAR and risks stemming from imported inflationary influences.”

“Domestic investors are fleeing  asset markets, as they begin to prefer holding cash, and foreign investors are likely to continue doing the same, until there is clarity surrounding the extent and duration of macro negativity.”