Pula: Rand-Induced Stability Ahead

In line with our short-term view for the South African rand, we expect the pula to remain broadly stable versus the US dollar with BWP6.40/US$ - BWP7.30/US$ likely to form the bounds of the unit's trading range. A period of volatility is possible in the period around the South African Reserve Bank interest rate meeting scheduled for July 22. Market expectations seem quite evenly split between a hold and a 50 basis point cut with BMI in the latter camp. We note however, that pula volatility will likely be less pronounced than that of its South African counterpart given that we believe that there will be no further easing on the part of the Botswana monetary authorities.

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