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4 May 2016
ZAR: All that glitters is not gold – Deutsche Bank
Gautam Kalani, Strategist at Deutsche Bank, remains fundamentally bearish on ZAR, but don’t recommend outright cash shorts at this stage due to the generally carry-positive external environment.
Key Quotes
“Despite the near-term bullishness on EM carry, there is little belief in chasing the appreciation in rand. Rather the preference was to express this EM carry positive view by being long RUB and TRY, rather than ZAR.
In sum, EM carry has room to perform over the next month or so, with the capitulation in external risks (Yellen dovishness, crude stabilization, receding Chinese policy worries) and a lack of major risk events; but we expect this next phase of EM carry performance to involve ZAR underperforming the other EMEA high yielders (where going outright long is more attractive).”
Key Quotes
“Despite the near-term bullishness on EM carry, there is little belief in chasing the appreciation in rand. Rather the preference was to express this EM carry positive view by being long RUB and TRY, rather than ZAR.
In sum, EM carry has room to perform over the next month or so, with the capitulation in external risks (Yellen dovishness, crude stabilization, receding Chinese policy worries) and a lack of major risk events; but we expect this next phase of EM carry performance to involve ZAR underperforming the other EMEA high yielders (where going outright long is more attractive).”