In recent weeks, SA’s terms of trade have recovered from their lows. Although still a far cry from the peaks of two years ago, they are moving in the right direction to lend some support to the currency through the trade account. A surge in gold and platinum prices has boosted the ZAR’s fortunes in the past two weeks.
Whether these trends are sustained will depend on many offshore factors, but global geopolitical forces may be shifting in a direction that would support SA and the ZAR over the medium to long term. Much depends on how the USD is perceived and whether central banks are successful in engineering a soft landing.
Baseline View: For now, the improved terms of trade are helping the ZAR at the time the currency needs it the most. The elections have caused a lot of concern, but these terms of trade developments could help limit the damage to the point where they might also help the ZAR consolidate at current levels ahead of the elections.
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