US banking giant drops its bet on the Rand after SARB's no change on rates

South Africa's Reserve Bank stunned markets on Thursday, holding the repo rate at 7% in a split 4-2 vote - defying 17 of 20 economists polled, who had expected a hike after inflation jumped to 5% in June. The rand promptly weakened against both the euro and the dollar, its worst session since March. Below, Citigroup explains why it just closed a bullish rand bet at a $468,000 loss, and why it now sees the currency as "fragile" heading into a period of elevated oil prices and Middle East-driven uncertainty..By Ray Ndlovu and Kerim Karakaya.Citigroup Inc. closed its bullish position on the South African rand against the euro hours after concluding the currency would remain “fragile” following the central bank’s surprise decision to keep interest rates unchanged.“We are now exiting the short EUR/ZAR position, recently opened at spot reference 18.79,” the investment bank’s global head of emerging markets strategy Luis Costa said. The trade generated a total loss of 2.13%, or about $468,334, on a $22 million notional position, which was closed at 19.19, he said. .The “underlying assumption in our bullish rand view has changed significantly over the past 24 hours,” Costa said. “The South African Reserve Bank contradicted its previous position by not hiking rates this week.”The rand has depreciated almost 3% against the euro to 19.19 since the central bank’s six-member monetary policy committee in a split decision unexpectedly kept the policy rate at 7% on Thursday and revised its inflation forecasts lower. Seventeen of the 20 economists surveyed by Bloomberg had expected a quarter-point rate increase after inflation accelerated more than expected to 5% in June, moving further away from the central bank’s 3% target, while the resumption of the US-Iran war has driven up fuel and fertilizer prices.Asked his views on the disconnect between what analysts expected and what the central bank delivered, Governor Lesetja Kganyago said “it is a dismal science that we are playing.” Adding that “in this uncertain environment, you can forgive people for missing what they had actually expected,” he said. “It might just turn down the line that we were wrong.”Citigroup expects the rand to remain “fragile” under current conditions, citing rising energy costs as a key risk. “As much as we remain constructive on some replenishment of terms of trade value in the medium term — iron ore, gold, platinum and some easing in petrol prices over the next quarters — we believe it is tough to imagine that the rand can indeed absorb the short-term shocks emerging-market assets are seeing now.”.Read more:.FT: SARB Governor heralds SA’s imminent grey list exit as beating “existential crisis”.The central bank’s surprise decision could also impact South African government bonds, Costa warned. “Positions have been rather sticky up until now, under the assumption the SARB would be able to keep investor confidence intact.”.© 2026 Bloomberg L.P..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

US banking giant drops its bet on the Rand after SARB's no change on rates

Related Stories

BNC#9 | Wheatley Q&A: Will the SARB take your crypto? And Eskom's missed Bitcoin windfall

Crypto, investment firms push back against SARB and Treasury's draft cross-border rules

DA leader Mark Burke's former company Kastelo targeted by SARB on crypto deals

Rate hold, Rand fall: The SARB's costly miscalculation