We've been long JSE40 for sometime and tactically long ZAR just earlier this week. Risk-reward for keeping longs is attractive going into yesterday's CPI and today's SARB MPC. Although SARB has its own problems with questions over its long-term independence/autonomy, it's no CBRT (problems there are more immediate).
Going into S&P/Moody's reviews tomorrow (both have SAGB local currency ratings one notch above IG), what seemed imminent a month ago is a bit less likely now. Analysts presume both agencies would want to wait for the outcome of the ANC party congress in December, where a conciliatory Ramaphosa has a better-than-fair chance of defeating Zuma's ex-wife.
We may cut longs into the decision (especially if ZAR moves towards 13.50 ahead of the decision) but at this juncture, risk-reward for keeping with them is fair-to-attractive in expectation of a relief rally.
ZAR support levels: 13.78 (50dma) and 13.46 (100dma)
ZAR decoupled from TRY this month - demonstrating TRY weakness very idiosyncratic and govt's own doing:
EZA ETF cushioned by stable JSE40 and recent rebound in ZAR:
Update: We close this position ahead of Moody's / S&P review. Based on what we've read, markets' baseline scenario of single-downgrade could lead to 1% sell-off. A double downgrade a 5% sell-off. And no downgrade a relief rally of 2%.
Probability-weighted return = -1.5%. No strong view here vs consensus, so we close a tactical long ZAR at a small loss.