BNY warns ZAR and PEN face pressure from declining metals prices despite favorable carry trade conditions.
Weaker precious metals prices are dampening the outlook for the South African Rand (ZAR) and Peruvian Sol (PEN), even as carry trade conditions improve. Platinum group metals (PGMs) dominate South Africa’s exports, while Peru is the world’s third-largest silver producer, making both currencies highly sensitive to metals price swings.
The report notes that high nominal and real yields are pressuring industrial and precious metals, undermining export receipts. While ZAR and PEN remain exposed, institutional reforms in South Africa and policy shifts in Peru may prevent aggressive underperformance.
Despite the headwinds, BNY does not anticipate outright weakness, citing South Africa’s inflation mandate and central bank resilience as stabilizing factors.