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Picture courtesy: (The Conversation)The Rand showed signs of weakening as uncertainty over President Ramaphosa’s cabinet announcement.
(The Post News)- Following the recent elections and the re-election of President Cyril Ramaphosa, investors and the nation are eagerly anticipating the announcement of a new cabinet.
On Wednesday, June 26, the Rand showed signs of weakening as uncertainty loomed over President Ramaphosa’s forthcoming cabinet appointments, trading at R18.16 against the US dollar.
Nevertheless, amidst this uncertainty, the South African Rand and markets have demonstrated resilience, strengthening to R18 against the US dollar and maintaining stability throughout the week.
The Rand has been strengthening since the announcement of the so-called Government of National Unity (GNU) after no party received a majority and Ramaphosa was elected by Parliament with 286 votes to 44 votes against Julius Malema. While the markets have grown by 7.6% in the past week.
According to Simply Wall Street’s South African JSE market analysis and evaluation, the markets have grown by 7.6% during the past seven days, with every sector registering growth, led by the financial sector at 13.83%.
Data showing the trading history of the Rand to the US dollar, from Exchange Rates UK indicates that the Rand was trading at a minimum of R18.360 to a maximum of R18.450, while it closed at R18.353 on Friday 14 June, the day parties who are in the GNU, announced their participation in the new government.
Since then, the latest data on Wednesday, June 19 shows that the Rand was trading between a minimum of R17.954 to R18.02, while it closed the day at R17.951.
In a recent interview with the Financial Times, Dr Thandiwe Mabaso, an economist at the University of Cape Town, emphasised the importance of political stability in driving economic growth. She highlighted that the GNU’s commitment to cooperation across party lines has bolstered investor confidence. “The Rand’s resilience reflects not only market dynamics but also the belief that our leaders are prioritising economic recovery,” Dr. Mabaso stated.
Analysts at Business Day attribute the Rand’s strength to several factors. First, the successful formation of the GNU allayed fears of prolonged political instability.
Secondly, global commodity prices, particularly for gold and platinum, have rebounded, benefiting South Africa’s export-oriented economy. Lastly, the central bank’s prudent monetary policy has supported the currency.
Earlier in January this year a fund manager survey by the Bank of America (BofA) as reported by Business Tech forecasted that the South African Rand would finish the year at R17.73 to the US dollar.
Dr. Sipho Nkosi, a renowned investment strategist, predicts that the Rand’s trajectory will depend on the GNU’s policy decisions. “Investors are cautiously optimistic,” he said.
“We need clarity on fiscal reforms, infrastructure investment, and addressing unemployment. If the GNU delivers, the Rand could maintain its upward momentum,” Nkosi stated.
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