The rand firmed the most in a month on Monday, as investors assessed developments around SA’s coalition possibilities.
With the ANC losing its majority and its share of the vote plunging to 40%, it is forced to seek coalition partners at national level for the first time.
The DA retained its status as the country’s official opposition, while uMkhonto weSizwe (MK) — led by former president Jacob Zuma — became the third-largest party, followed by the EFF, IFP, Patriotic Alliance and the Freedom Front Plus.
The local currency had managed to claw back some of its recent losses as the dust started to settle on local elections, IG senior market analyst Shaun Murison said.
“The rand’s rebound from oversold conditions comes in the wake of coalition talks and perhaps shows some optimism that more conservative, business-friendly alliances are likely to be formed rather than those leaning towards leftist policy,” Murison said.
TreasuryOne currency strategist Andre Cilliers said the rand was holding steady despite the uncertainty around what the coalition government would look like. “There appears to be little chance of an ANC and MK party coalition at this stage.”
“There is much speculation around a possible ANC-DA coalition, which would probably be the most investor-friendly and good for the rand,” said Cilliers. “Both parties have hinted at possible upcoming negotiations, and the next week or so will be interesting with increased volatility in the currency.”
At 5.45pm, the rand had strengthened 1.11% to R18.5378/$ — the biggest one-day gain since May 1, according to Infront data. It had firmed 0.89% to R20.1625/€ and 0.76% to R23.7699/£. The euro was 0.38% firmer at $1.0887.
“While volatility in the domestic currency is likely to continue, a move below the R18.60/$ level, should it manifest, could signify on a technical basis that R18.30/$ becomes a feasible short-term target for the currency pair,” Murison said.
Globally, investors will get fresh insights into the strength of the US labour market and how the Federal Reserve might act when nonfarm payrolls and unemployment numbers are released on Friday.
The JSE all share gained 1.36% to 77,746 points and the top 40 advanced 1.38%.
At 5.55pm, the Dow Jones industrial average was 0.67% weaker at 38,428 points, while the S&P 500 was down 0.13%. Markets were mixed in Europe.
In the commodity market, gold gained 0.68% to $2,342.94/oz, while platinum lost 1.79% to $1,025.70/oz. Brent crude fell 3.27% to $78.48 a barrel.
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