Rand surges on unexpected rate rise

Summary:

South African Reserve Bank raise repo rate to 6.75%
Hike comes despite gloomier outlook for growth
Rand gains over 1% against the US dollar

The best performing currency today is the South African Rand, which has enjoyed a strong move higher after an unexpected hike from the central bank. The South African Reserve Bank delivered a 25 basis point increase to its benchmark repo rate which now stands at 6.75%. This has come as something of a surprise to the market with a poll of Reuters economists expecting this tool to be kept steady at 6.5%.

The South African Rand is the best performing currency on the day after the rate decision, gaining 1.3% vs the US Dollar. Source: xStation

An indication of how narrowly this decision was reached can be seen in the split amongst members of the Monetary policy committee, with 3 voting in favour of a hike and 3 opposing - the rate was presumably increased despite this because governor Kganyago supported it. The message from the bank was surprisingly downbeat given the hike with Ksangyao stating that tighter global conditions, market volatility and a change in market sentiment towards emerging economies all presented currency risks for the Rand. Despite this the statement expressed that the implied path of policy rates is for 4 hikes of 25 basis points, to 7.5% by the end of 2020.

The move higher in the Rand has seen the currency appreciate to its strongest level in several months with the USDZAR falling to its lowest level since August. Taking fibs from the lows around 11.49 seen back in February you can see that the market is looking to make a clean break below the 38.2-41.4% region from 14.08-13.95 and if the move gains traction then there is scope for sizable declines. The 50% at 13.59 could be seen as a first target for shorts but the 61.8% at 13.09 provides a better risk:reward ratio and also coincides with the swing low from July.

USDZAR has dropped to its lowest level in 3 months today and is looking to make a decisive break lower. Daily highs of 13.95 could be seen as near term resistance while the 61.8% fib of the larger rally at 13.09 could be seen as a possible target for shorts. Source: xStation

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

Cookie name	Description
SERVERID
userBranchSymbol	Expiration date 1 day
adobe_unique_id	Expiration date 364 days
test_cookie	Expiration date 1 hour
SESSID	Expiration date 1 day
__hssc	Expiration date 1 hour
__cf_bm	Expiration date 1 hour
intercom-id-iojaybix	Expiration date 270 days
intercom-session-iojaybix	Expiration date 6 days
xtbCookiesSettings	Expiration date 364 days
xtbLanguageSettings	Expiration date 364 days
TS5b68a4e1027
countryIsoCode
userPreviousBranchSymbol	Expiration date 364 days
_cfuvid
intercom-device-id-iojaybix	Expiration date 270 days
__cfruid
UserMatchHistory	Expiration date 29 days

Cookie name	Description
_gid	Expiration date 1 day
_gat_UA-22576382-1	Expiration date 1 hour
_gat_UA-121192761-1	Expiration date 1 hour
_ga_CBPL72L2EC	Expiration date 729 days
_ga	Expiration date 729 days
AnalyticsSyncHistory	Expiration date 29 days
af_id	Expiration date 394 days
afUserId	Expiration date 729 days
AF_SYNC	Expiration date 6 days
__hstc	Expiration date 179 days
__hssrc
_vwo_uuid_v2	Expiration date 365 days
_ga_TC79BEJ20L	Expiration date 729 days
_vwo_uuid	Expiration date 365 days
_vwo_ds	Expiration date 29 days
_vwo_sn	Expiration date 1 hour
_vis_opt_s	Expiration date 99 days
_vis_opt_test_cookie
_gcl_au	Expiration date 89 days

Cookie name	Description
MUID	Expiration date 389 days
_omappvp	Expiration date 3998 days
_omappvs	Expiration date 1 hour
_uetsid	Expiration date 1 day
_uetvid	Expiration date 389 days
_fbp	Expiration date 89 days
fr	Expiration date 89 days
muc_ads	Expiration date 729 days
lang
_ttp	Expiration date 389 days
_tt_enable_cookie	Expiration date 389 days
hubspotutk	Expiration date 179 days
YSC
VISITOR_INFO1_LIVE	Expiration date 179 days
li_sugr	Expiration date 89 days
guest_id_marketing	Expiration date 729 days
guest_id_ads	Expiration date 729 days
guest_id	Expiration date 729 days
MSPTC	Expiration date 389 days
IDE	Expiration date 389 days
VISITOR_PRIVACY_METADATA	Expiration date 179 days

Cookie name	Description
personalization_id	Expiration date 729 days
UserMatchHistory	Expiration date 29 days
bcookie	Expiration date 364 days
lidc	Expiration date 1 day
lang
bscookie	Expiration date 364 days
li_gc	Expiration date 179 days