On Monday, the rand strengthened to R18.00 at the opening but closed at R18.32 as the market realized the new government's policies would take time to drive economic growth.
against the US Dollar but lost about 3.05%, reaching a two-week low of R18.50 on Thursday as investors kept a close watch on the country’s political situation.
Reports indicated a significant disagreement between the pro-business Democratic Alliance and President Ramaphosa over cabinet positions. This, combined with a stronger dollar, caused the rand to drop sharply on Thursday. The DA had agreed to join the ANC and eight other parties in a Government of National Unity after the ANC lost its parliamentary majority in last month’s election.
Despite these challenges, the rand attempted to recover, buoyed by a higher-than-expected trade surplus in South Africa and lower-than-expected US GDP growth, which fell from 3.4% to 1.4%, indicating an economy struggling with inflation. The first US presidential debate on Thursday did not favour the Democratic representative, adding to market uncertainty with four months until the election. This allowed the rand to rally late on Friday, closing the week at R18.18 against the dollar.
On Monday, the rand further strengthened, opening at R18.00 as investors reacted to the previous night’s cabinet announcement. However, this boost was short-lived, and the rate closed the day at R18.32 as the market realised the new government would take time to implement policies to drive economic growth.
Last week’s cabinet announcement and economic data releases resulted in a fluctuating but ultimately weakening rand. Without the late gains on Friday, rates would have been higher early this week. The coming week promises to be interesting as we observe whether the dollar will appreciate despite signs of a weaker economy or if the rand will continue its pushback.delivered straight to your inbox every weekday to keep on top of everything happening with the ZAR.
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