·        Positive momentum for the rand has been in place since December 2017 – but is now fading. For the rand to appreciate further there needs to be a renewed positive local impetus in our opinion. At the same time, global developments (especially major central bank policy) are set to remain a headwind rather than a tailwind for the local currency.

·        What are the local catalysts needed for the rand to grind stronger in the face of a Fed that is set to run tighter monetary policy?

o   During the course of the next month there are two key events that may add renewed short-term strength to the rand. Firstly, the rand should strengthen if Moody’s keeps South Africa’s local currency rating on the investment grade level this month (this is our base case). Secondly, if the SARB remains on hold at their MPC meeting of 28 March 2018 then the rand may find some support from an interest rate differential perspective (no cut this month is our base case – we expect a cut only in June).  The above is why, from a rand perspective, we believe it is too soon to get bearish just yet. Local support could return, if only briefly, depending on the outcome of these events.

o   A rally in the currency over the next month on approach to R11.65, from a risk/return perspective, would likely be good news for importers looking to gain dollar exposure. On a six and 12 month view, we expect rand-strength below this level to fade. Our six-month and 12-month target range for the USDZAR is R12.40 and R13.00 respectively.

o   Worth noting that, in our view, extreme weakness (i.e. a rand at 13.00 within the next six months) is unsustainable, unless FX volatility dramatically climbs. On a six month view, any rand weakness beyond 12.50 would appear attractive from an export perspective. That is, on a six month view, we would fade weakness beyond 12.50.

o   Keep an eye on support at R11.71 and resistance at R12.18 (see our latest technical strategy report for a more detailed technical view on the currency).