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Investing.com - Bank of America forecasts the South African rand will weaken against the U.S. dollar during a specific window on August 26, according to a recent research note.
The bank identified the USD/ZAR currency pair movement between 3:00 PM and 4:00 PM London time on August 26 as its "highest conviction" trade related to the upcoming MSCI index rebalancing. BofA also expects the Czech koruna to weaken, with the USD/CZK pair likely rising between 3:45 PM and 4:00 PM due to its "considerable sensitivity to MSCI flows."
The Israeli shekel is anticipated to receive the largest inflows during the rebalancing period, though Bank of America noted that historical "hit ratios" for predicting shekel movements have been low. South Korea’s won is expected to experience the second-largest outflows among currencies affected by the rebalancing.
Bank of America’s analysis indicates that certain Asian currencies, specifically the Korean won (KRW) and Taiwan dollar (TWD), appear less sensitive to MSCI Emerging Markets flows compared to currencies from Eastern Europe, Middle East, Africa, and Latin America.
The MSCI rebalancing, a periodic adjustment of index weightings based on market capitalization changes, regularly triggers significant currency movements as global funds adjust their portfolios to match the updated index compositions.
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