Citigroup Abandons Bullish Rand Bet After Surprise Rate Decision

Citigroup has closed its bullish position on the South African rand against the euro after the Reserve Bank's surprise decision to keep interest rates unchanged.

The investment bank's global head of emerging markets strategy, Luis Costa, said they had exited their short EUR/ZAR position at spot reference 18.79, with a total loss of 2.13% or around $468,334 on a $22 million notional position.

The rand has depreciated almost 3% against the euro to 19.19 since the central bank's six-member monetary policy committee unexpectedly kept the policy rate at 7%, contradicting its previous stance and revised inflation forecasts lower.

Citigroup expects the rand to remain 'fragile' under current conditions, citing rising energy costs as a key risk, and warned that the surprise decision could also impact South African government bonds.