South Africa’s rand strengthens despite political tension

 

The South African rand showed a modest rebound on Friday, gaining 0.4% against the US dollar to trade at 17.8075 by 1424 GMT. This followed a sharp decline the previous day amid growing political tensions between President Cyril Ramaphosa and the Democratic Alliance, a key coalition partner. The immediate cause of the strain was Ramaphosa’s dismissal of Deputy Trade Minister Andrew Whitfield, a member of the Democratic Alliance. Despite the political turmoil, the rand gained strength, largely due to a weaker US dollar, which was trading near its lowest point in over three years against a basket of major currencies. Analysts, however, warned that continued coalition tensions could exert pressure on the rand in the days ahead. Commerzbank analyst Volkmar Baur noted that uncertainty surrounding the coalition could weigh on the currency, especially over the weekend. President Ramaphosa indicated that he expects the Democratic Alliance to nominate a new candidate to replace Whitfield. The party is set to hold a press conference on Saturday to outline its next steps. Political observers are closely watching whether the coalition will hold or face deeper fractures. Investors are also looking ahead to important economic data scheduled for release on Monday, including May figures for credit extension, money supply, trade balance, and the budget balance. These indicators will provide further insight into the health of the South African economy. Meanwhile, the Johannesburg Stock Exchange's Top-40 index fell by 0.3 percent, reflecting cautious investor sentiment. South Africa’s benchmark 2035 government bond also declined, with its yield rising by 3 basis points to reach 9.985 percent. The overall market reaction suggests that while the rand has shown short-term resilience, both political instability and economic data releases could influence its trajectory in the near term.

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