South African Rand Predicted Lower Against the USD

Tactical currency strategists at Morgan Stanley have told clients they are sellers of the South African Rand.

The currency pair which will best express the ZAR-negative viewpoint is USD/ZAR which is expected to rise to a target of 12.25.

The US dollar to Rand exchange rate is currently trading at 11.6095.

Incase the forecast proves incorrect a stop loss plaed at 11.20 should be triggered.

Vandit D. Shah tells us why the dollar will likely advance against the South African rand:

USD/ZAR has consistently trended higher since mid-2011, and our expectation of a continuation of the trend suggests USD/ZAR will break above 12 this year.
While valuations have improved, we do not yet think they are attractive in light of structural shifts in the external environment and continued pressure on domestic productivity.
Both terms of trade and productivity growth relative to the US have been in negative territory for almost every quarter since 2011.
The recent decline in oil prices is supportive of the terms of trade though this positive impact is dependent on the extent to which oil underperforms industrial and precious metals (South Africa’s key exports).
Productivity remains challenged by electricity output and the labour market which will come into greater focus during gold sector wage negotiations (see FX Pulse: ZAR: What Union Divisions Mean for ZAR, Nov 13, 2014).
The main risk to this trade is any normalisation in data relative to bearish market expectations which may bring about a ZAR recovery, while long USD positioning has also built up in recent weeks.