USD/ZAR to trade at 15.75 on S&P 500 surging to pre-Covid highs of 3,386 – Credit Suisse

The correlation between USD/ZAR and the S&P 500 index is likely to remain high in the short run and analysts at Credit Suisse continue to see a short USD/ZAR position as good representation within the EM currency world of a global risk-on view. Overall risks to USD/ZAR are skewed on the downside and hold a short-term risk-on target of 15.90-16.00.

Key quotes

“In a bullish scenario that takes the S&P 500 to 3,300 we would expect USD/ZAR to fall to 16.20. A more bullish scenario where the S&P 500 rises back to its February pre-Covidcrisis high of 3,386 would be consistent with USD/ZAR at the 15.75 area.”

“In a bearish scenario, a drop in the S&P 500 to the 3,100 area would be consistent with USD/ZAR at 17.20. But we still think that there is a case for some ‘outperformance’ of the rand over the S&P500 in a bullish scenario.”

“We think that risks to USD/ZAR are still skewed towards the downside even after the recent rally. We mark the 15.90-16.00 range in USD/ZAR as a short-term risk-on target.”