South African rand extends losses, focus on unity government’s reforms
11:40 am Tuesday, July 02nd, 2024
JOHANNESBURG (Reuters) -The South African rand extended losses on Tuesday after a turbulent start to the week as markets waited to see how the new government of national unity (GNU) would approach economic reform following the formation of the cabinet.
At 1530 GMT, the rand traded at 18.6325 against the dollar, 1.5% weaker than its previous close. The dollar was little changed against a basket of global currencies.
“With the announcement of the GNU cabinet in the rear-view mirror, the market is now waiting for clear signs of intent concerning economic reforms,” said ETM Analytics in a research note.
President Cyril Ramaphosa’s African National Congress (ANC) lost its parliamentary majority for the first time in 30 years in the May 29 election and has formed a unity government with former rivals as a way to stay in power.
South African assets gave up some gains on Monday as the initial optimism shown by the markets waned a day after the new cabinet, which included former opposition leader John Steenhuisen as agriculture minister, was formed.
Recent dollar strength also subdued the rand as markets begin turning their attention to the U.S. presidential election in November.
“Rising momentum behind Donald Trump’s re-election campaign after President Biden’s weak debate performance last week and a Supreme Court ruling that Trump has broad immunity from prosecution yesterday was the driver,” ETM Analytics added.
The risk-sensitive rand often takes cues from global drivers like U.S. monetary policy and political developments in addition to local factors.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed down 0.3%.
South Africa’s benchmark 2030 government bond was slightly stronger, with the yield down 0.5 basis points to 9.95%.
(Reporting by Tannur Anders; Editing by Andrew Heavens, Bhargav Acharya, Jan Harvey, Alexandra Hudson)
