The rand reversed the previous session’s gains on Thursday, falling the most in a month amid shaky developments around the government of national unity (GNU).
Investors have been on edge ahead of President Cyril Ramaphosa’s expected announcement of a new cabinet after reports indicated it would be this week.
It is understood that the DA was offered the strategically important trade, industry & competition ministry, which is key to the ANC’s transformation agenda. However, Business Day reported earlier on Thursday that Ramaphosa has decided to retract this offer.
The ministry would have given the DA significant powers to direct economic policymaking. It is understood that Ramaphosa instead offered the DA ministries including tourism, public works, agriculture and transport, which put the DA in what party leaders describe as an impossible situation.
With no decision in the bag yet, and the prolonged uncertainty around the GNU and cabinet appointments, analysts said rand volatility was expected to continue.
At 5.55pm, the rand had weakened 1.55% to R18.4776/$, having reached an intraday worse of R18.4832/$ — the weakest level in almost three weeks. It had weakened 1.37% to R19.7773/€ and 1.24% to R23.2244/£. The euro was 0.28% firmer at $1.0703. The JSE all share had lost 0.36% to 78,969 points and the top 40 0.38%.
Globally, investors continued to watch data for insights on the future path of inflation and the US Federal Reserve’s interest rates.
Investors are also looking ahead to the release of May’s personal consumption expenditure (PCE) data, the Fed’s preferred inflation gauge, on Friday. Markets are hoping the index will show signs of moderation in US inflation, which will support the case for potential monetary policy easing. The consensus is that the PCE will show inflation eased to 2.6% in May, after a reading of 2.7% in April.
“If the PCE data falls short of expectations, stagflation concerns will dominate the headlines and weigh on sentiment. But if the estimates prove accurate or even suggest slower growth, it could help calm market nerves and pave the way for a smoother transition into July,” said FXTM senior research analyst Lukman Otunuga.
At 6.15pm, the Dow Jones industrial average was 0.21% firmer at 39,211 points, while markets were weaker in Europe.
In the commodities markets, gold gained 1.19% to $2,325.39/oz, while platinum fell 2.22% to $989.6/oz. Brent crude was 0.59% firmer at $85.75 a barrel.
With Hajra Omarjee
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