Societe Generale SA, Credit Agricole CIB and HSBC Holdings Plc recommended short-dollar positions versus the rand last week, citing supportive factors such as the central bank’s hawkish stance, relatively low inflation and an expected recovery in China’s economy that would boost demand for South Africa’s raw-material exports.imposed by Eskom Holdings SOC Ltd.
The South African currency has been hard-hit by the Eskom news, though the country’s electricity crisis is nothing new, said Cristian Maggio, the London-based head of portfolio strategy at TD Securities. “South Africa has been dealing with power shortages for years,” Maggio said. “Only the market seems to have forgotten because of Covid, and other priorities that crept to the forefront.”
Credit Agricole recommended going short the dollar versus the rand on June 21, entering the trade at 15.9456 rand per dollar, with a stop-loss at 16.2684. It was stopped out of the trade on Wednesday when the rand weakened to 16.2965, taking a loss of 1.9%, according to Sebastien Barbe, head of emerging-market research at the lender.
SocGen entered a similar trade, also on June 21, with a stop loss at 16.35, while HSBC opened a short-dollar-rand trade idea on June 24 at 15.92, with a stop at 16.30. Both stops were breached on Thursday when the rand slumped to 16.4736, the weakest level since Oct. 2020.
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