USDZAR rises sharply as US accuses South Africa of supplying weapons to Russia
The USDZAR has climbed over 5% for the week and is trading near R19.42, down from its high of R19.5152. US ambassador, Reuben Brigety, accused South Africa of providing weapons and ammunition to Russia. These were allegedly loaded onto a Russian ship at the Simon's Town naval base in Cape Town in December 2022. The news caused the rand to fall near its record low from 2020, and it also approached a record low against the pound. The possibility of economic action from the US against South Africa, such as scrapping the duty-free export benefits it receives under the African Growth and Opportunity Act, has raised concerns among investors.
The rand was already under pressure from several factors, including load shedding, a deepening economic crisis, interest rate concerns, and South Africa's recent greylisting by the Financial Action Task Force. The South African Reserve Bank has had to balance the need for interest rate hikes to fight inflation with the potential harm to an already struggling economy. The situation has left investors wary, and the rand has been one of the worst-performing emerging market currencies over the past year.
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The USDZAR's Bollinger bands have expanded (black ellipses) as the currency pair's volatility increased. However, its daily RSI is above 80 and overbought (green rectangle). This may provide a ceiling in the short term.
If the currency pair holds its position in the top zone between the upper blue and red bands, pressure on the rand will continue.
Image by Dewald Van Rensburg from Pixabay
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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