The rand demonstrated notable resilience, but ongoing challenges and political uncertainties continue to pose risks.
Over the past week, the South African rand experienced a, driven by both international market dynamics and domestic issues.
The rand gained strength as fears of escalating tensions in the Middle East, specifically between Israel and Iran, eased. This reduction in geopolitical risk led to stabilisation in global markets, decreasing the demand for safe-haven assets like the US Dollar. The South African Reserve Bank will release its interest rate decision next week and is expected to maintain its conservative monetary stance, emphasising holding higher interest rates to combat inflation.
With national elections upon us, political uncertainty has increased. Polls suggest the ruling ANC might lose its majority, potentially leading to a coalition government. This uncertainty is expected to contribute to the rand volatility as markets assess the political landscape. With the election also comes the heightened chance of unrest and civil protests as people are not happy with the outcome or processes involving the polls.
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