Rand weakens as post-election sentiment loses momentum
The rally in the rand has been dampened by the ongoing tension between the US and China
The rand was little changed on Friday as positive sentiment from the national elections wears off.
The local currency appreciated this week to R14.15/$ as the markets reacted to the ANC's victory, on hopes that the party's new term in office would allow President Cyril Ramaphosa to implement expected economic reform.
But Mercato Financial Services analyst Nico du Plessis said on Friday that Ramaphosa's “new dawn” has lost credibility owing to a “disappointing” list of ANC members headed for parliament and a warning by Moody's on SA's mounting debt.
The markets will be eyeing political activity on the local front as Ramaphosa is set to appoint his new cabinet. Investors will be watching to see if the new cabinet will play an instrumental role in helping him root out corruption and fix troubled state-owned enterprises.
“The broader range of R14.15/$ to R14.38/$ remains intact, although the rand is struggling to muster enough momentum for a substantial break below the R14.15/$ mark, said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions. “Should we hear the right noises from the government — and more specifically President Ramaphosa — and carry trade continues to support the local unit, we can expect the rand to continue its rally,” she added.
At 9.40am, the rand was down 0.09% to R14.3021/$ as the dollar strengthened as a result of positive US economic data on Thursday. The rand fell 0.14% to R15.9877/€ and was flat at R18.2792/£. The euro was up 0.06% to $1.1179.
Gold was flat at $1286.52/oz, while platinum was down 0.78% to $826.7. Brent crude was flat at $72.80 a barrel.
The rally in the rand was dampened by the ongoing tension between the US and China. That escalated on Wednesday after US President Donald Trump signed an executive order to ban Chinese telecommunications giant Huawei from the US market.