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South African rand stable, national election looms

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South African rand stable, national election looms

South African rand stable, national election looms
Photo by Reuters

28th May 2024

By: Reuters

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The South African rand was stable in early trading on Tuesday, against a weaker dollar and ahead of a national election on Wednesday which could see the ruling party lose its majority for the first time in 30 years.

At 07:09 GMT, the rand traded at 18.3725 against the dollar, around 0.1% stronger than its previous close.

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The dollar last traded around 0.09% weaker against a basket of global currencies.

"The ZAR has rebounded slightly amid a weaker USD, with investors cautious ahead of key inflation reports (in the US) and the upcoming elections (in South Africa)," said Andre Cilliers, currency strategist at TreasuryONE.

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"The rand is likely to tread water during the course of the day ahead of tomorrow's elections, as markets close out positions in the rand ahead and keep them to a bare minimum."

On Wednesday, South Africans will vote in national and provincial elections, with polls suggesting the governing African National Congress (ANC) could lose its parliamentary majority for the first time since the end of apartheid in 1994.

This outcome would force the ANC into a coalition to maintain governing power.

Results are expected to start trickling in late on Wednesday, and markets will likely take direction as the results become clearer into the second half of the week.

"Investors are keenly watching for a stable coalition outcome to avoid ideological swings, especially towards populist parties, which could stabilise South African financial markets," Cilliers added.

South Africa's benchmark 2030 government bond was slightly weaker in early deals, with the yield up 1.5 basis points to 10.575%.

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