As the elections approach, the rand might struggle to make further gains as the market assesses what the election results mean for national coalition politics.
has been hitting local lows against the USD and GBP, but this downward trend seems to be slowing. Recently, we observed the smallest weekly drop in the GBP/ZAR exchange rate since the end of April and a similar pattern in the USD/ZAR rate.
The rand is influenced by global factors like US monetary policy as well as local conditions. Often, the rand’s gains are due to a weakening Dollar. This past week, markets have been looking for clues about future US interest rates, with more Fed officials speaking and the minutes of the Fed’s last meeting being published on Wednesday. Strong indications that the US Federal Reserve will cut rates later this year have been devaluing the Dollar.
South Africa’s benchmark 2030 government bond strengthened, with the yield dropping seven basis points to 10.300%. On the Johannesburg Stock Exchange, both the blue-chip Top-40 index and the broader all-share index closed about 0.7% higher, indicating that the rand’s strength is due to its own growth and not just a weakening Dollar. However, we should expect more volatility in the coming week, and further slippage in the Rand is possible.
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