The rand gained on Friday due to a record high gold price driven by investors seeking safe haven assets amid worries over a global trade war.
At 6.30pm the local currency had gained about 1% to R18.15/$. It fell earlier in the week on domestic political tension sparked by a revised budget, which saw the VAT rate increased by half a percentage point to 15.5%.
"The rand is ending the week on a strong note, bolstered by global market sentiment rather than domestic developments, despite uncertainty surrounding the ratification of the proposed budget," said Zain Vawda, market analyst at MarketPulse by Oanda.
Gold surged on Friday as investors piled on to a historic rally in the safe haven asset to seek cover from economic uncertainty sparked by US President Donald Trump’s tariff war.
Trump’s policies have unsettled global markets after he threatened a 200% tariff on wine, cognac and other alcohol imports from Europe, escalating a global trade war that has worried financial markets and raised recession fears.
The rand’s strength had more to do with the record gold price and strong commodity prices than anything relating to the budget, said Cratos Capital portfolio manager Roy Topol.
The commodity-backed rand often takes cues from global drivers like US policy, but failed to capitalise on the dollar’s weakness for much of this week amid domestic political and budgetary spats.
Finance minister Enoch Godongwana tabled the 2025 budget on Wednesday, in which he said the VAT rate would be raised by another 0.5 percentage points next year.
Major political parties publicly rejected this proposal, after rebuffing Godongwana's initial 2-percentage-point VAT hike three weeks ago.
Analysts said budget uncertainty raised fiscal risk which would slow interest rate cut expectations. Investors will next week focus on the SA Reserve Bank’s interest rate decision.
A poll by Reuters on Friday found that the central bank will likely keep interest rates steady as global trade risks and battles over the national budget keep policymakers in wait-and-see mode.
On the JSE the blue-chip top 40 index closed up 1.02%.
The benchmark R2030 government bond was weaker, with the yield up 5.5 basis points to 9.165%.
At 6.50pm the gold price was flat at $2988.88/oz after earlier reaching a record high $3,005.
Reuters
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