Analysts at CIBC, forecast the USD/ZAR pair at 17.85 by the end of the second quarter and at 17.45 by the end of the third quarter. 

Key quotes: 

“The recent episode of bank-related equity woes provided additional justification for investors to abandon high ZAR nominal yields in return for the safety and liquidity of the USD. Additional evidence of recent capital flight comes via the realization that speculative investors have extended ZAR shorts to alltime extremes in the wake of a record weekly ZAR position reduction in the middle of March.”

“The scale of the speculative investor capitulation allied to the substantive unwinding of bond holdings does suggest that should risk sentiment materially improve, we do not view recent financial sector effects as systemic this could suggest the near 7% year to date ZAR depreciation could materially snap back, prompting USD/ZAR to rebound back towards the 200Day MAV at 17.51.” 

“The central bank (SARB) has lowered its 2023 growth assumption to 0.3%, due to substantive load shedding and or ongoing rail freight headwinds. Additionally, inflation remains a SARB concern. Inflation has remained outside of the 3-6% target range since May 2022. Policy tightening now
risks extending towards 8.00-8.25%, previously a terminal rate of 7.75% was assumed prior to the unexpected 50bps hike on 30 March.”