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The South African central bank is expected to leave lending rates unchanged at its next policy meeting, and therefore the renewed strength for the rand appears to be driven by external rather than domestic catalysts. Gains in the rand are accompanying gains in other emerging market currencies, as short-term appetite for riskier assets improves and the near certain December increase in US lending rates appears mostly digested.
The chart below shows the rand’s performance against the US dollar and reflects how the market is summising all the external and domestic catalysts.