Rand's investor exuberance being replaced with caution
July 2 (Reuters) -Investors reacted positively to news that South African president Cyril Ramaphosa and party leaders had reached agreement on a new coalition government. However, exuberance soon gave way to caution and the market changed course.
Friday into Monday and USD/ZAR fell from 18.5250 to 17.9600 before staging a late rebound into Monday's close. The Monday session closed at 18.3575, leading to a positive Tuesday start at 18.3850.
The new government is unlikely to have an immediate impact on economic growth or the wider reform process and investors will be waiting to see if the coalition brings anything new to the table. Analysts are looking at 2024 growth of around 1.0% and despite some optimism, there are risks to this forecast while South Africa adjusts to the new leadership team.
Compromise is not a word that sits well with investors but ultimately the new government was formed with the two major parties, African National Congress (ANC) and Democratic Alliance (DA), making compromises and accepting less than they had wanted.
With the ANC taking 40.2% of the vote at the May 29 election it has maintained most of the key ministerial positions, including that of finance minister and planning monitoring and evaluation, electricity-energy, water, and sanitation ministries.
The rand is likely to move into more of a consolidation phase in the near-term within a range of 18.20 to 18.70.
Related content: South Africa's rand showing strength but faces challenges nL4N3IT0IM
For more click on FXBUZ
USD/ZAR daily candle chart: https://tmsnrt.rs/4bx1wRU
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
