Gold Holds Key to ZAR's Strength Amid Domestic Challenges

TD Securities remains bullish on the South African Rand (ZAR) despite domestic headwinds, citing that they have repeatedly failed to generate sustained weakness in the currency. In fact, USD/ZAR's downtrend remains intact, with the analysts viewing rallies as opportunities to sell.

The analysts argue that global macro variables such as gold prices and equity risk sentiment continue to drive ZAR performance. As long as gold stays above $4,000/oz and global equity sentiment remains resilient, they see USD/ZAR rallies as selling opportunities.

Notably, domestic headwinds in South Africa have not been able to push the ZAR significantly lower. The recent SARB rate hold decision briefly drove USD/ZAR above 16.00 in July, but market was able to look past this policy misstep and pushed it back below 16.00 in August.