The rand reversed the previous session’s gains on Tuesday morning amid uncertainty around the coalition government.
The local currency rose as much as 1.6% in the previous session, as election risks waned and investor optimism about a more “market-friendly” coalition outcome grew.
“The rand benefited from a surge in flows that were also buoyed by investor reprieve amid signals that political leaders from the ANC were resistant to form coalitions with left-wing parties,” said RMB analysts.
“However, elevated uncertainty around potential electoral coalition scenarios and a potential government of national unity will weigh on the currency,” RMB analysts said, adding that the rand had also weakened from early morning activity on Tuesday amid profit-taking.
At 10.15am, the rand had weakened 1.12% to R18.7038/$, 0.9% to R20.3711/€ and 0.82% to R23.9312/£. The euro was 0.26% weaker at $1.0878.
Given the sustained fluidity of risks, investors should tactically position for a wide [dollar-rand] trading range between R18.3964 and R18.7202 today, with momentum still biased for potential waves of weakness in the rand, despite yesterday’s strong rally, the RMB analysts said.
Globally, weak US manufacturing data released on Monday raised concern about the strength of the economy.
The US ISM manufacturing index measured 48.7 in May, sending treasury yields lower, reported Bloomberg. A reading below 50 indicates a contraction.
Investors are turning their focus to the US jobs market, with the release of the Job Openings and Labor Turnover Survey due later on Tuesday, but the major data is Friday’s nonfarm payrolls and unemployment numbers.
“While the US economic data has started to show some signs of slowing, the labour market remains quite robust. Investors are watching these numbers to gauge when the first rate cut will be implemented,” said TreasuryOne currency strategist Andre Cilliers.
At 10.50, the JSE all share index had lost 0.55% to 77,315.82 points and the top 40 0.85%.
At the same time in Europe, the FTSE 100 was down 0.57%, France’s CAC 40 0.62% and Germany’s DAX 0.74%.
Gold lost 0.77% to $2,332.57/oz and platinum 1.68% to $1,009.90/oz. Brent crude was 1.68% weaker at $77.05 a barrel.
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