Rand a Buy says Crédit Agricole
- Written by: Sam Coventry
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Crédit Agricole has recommended buying the South African Rand against the Euro, citing attractive carry, a supportive trade balance, and rising metal prices.
Sébastien Barbé, Head of Emerging Market Research and Strategy at Crédit Agricole, says entering a long ZAR position versus the EUR looks attractive here as he looks for a move lower to 19.50 EUR/ZAR.
He notes that the Rand has rallied despite the difficult backdrop of U.S. tariffs (30%, amongst the highest in the world). "In our view, this is a sign that the other supports to the currency are significant," said Barbé.
Crédit Agricole highlights three main reasons for its bullish stance.
First, the interest rate gap with the Euro remains attractive. "On one-year rates, the gap with EUR rates is about 470bp," said Barbé, adding that while the South African Reserve Bank is expected to cut rates gradually, inflationary pressures mean monetary easing will be limited.
Second, South Africa’s trade balance is supported by subdued domestic demand as weak reform momentum caps domestic demand and imports, helping keep the trade balance in surplus.
Third, are stronger metal prices. "As a significant metal exporter, South Africa should benefit from the increase in metal prices since August," said Barbé.
He explains that platinum, which accounts for around 10% of total exports, has risen sharply this year, yet the Rand has not fully priced in the gain.
Crédit Agricole also says global fiscal stimulus could support the Rand further into 2026. The research noted that increased public spending in the U.S. and Europe could fuel higher demand for metals, which would be positive for South Africa’s export sector.
"We believe there remains some juice for the ZAR appreciation," said Barbé, adding that funding the position in euros also benefits from the carry gap.
He also believes the euro looks stretched in terms of positioning following a strong run, which means ZAR has greater scope to advance here than against other currencies.
