JOHANNESBURG (Reuters) – South Africa’s rand extended losses on Tuesday after a turbulent start to the week as markets waited to see how the new national unity government would handle economic reform after forming a cabinet.
By 11:31 GMT, the rand was trading at 18.475 against the dollar, down 0.6% from its previous close. The dollar was up more than 0.1% against a basket of global currencies.
“With the announcement of the GNU government in the rearview mirror, the market is now waiting for clear signals of intent regarding economic reforms,” ETM Analytics said in a research note.
President Cyril Ramaphosa’s African National Congress lost its parliamentary majority for the first time in 30 years in elections on May 29, and has formed a unity government with its former rivals as a way to stay in power.
South African assets gave up some of their gains on Monday as initial optimism in markets faded a day after the formation of a new government, which included former opposition leader John Steenhuisen as agriculture minister.
The strength of the dollar also helped weaken the rand as markets began to turn their attention to the US presidential election in November.
“The growing momentum behind Donald Trump’s reelection campaign following President Biden’s poor debate performance last week and the Supreme Court ruling granting Trump broad immunity from prosecution yesterday was the driver,” ETM Analytics added.
U.S. Federal Reserve Chairman Jerome Powell is scheduled to speak later on Tuesday, and markets will be listening for hints about the future path of interest rates in the world’s largest economy.
The risk-sensitive Rand is often affected by global factors such as US monetary policy and political developments as well as domestic factors.
On the Johannesburg Stock Exchange, the Top-40 index of leading shares fell by 0.5%.
South Africa’s benchmark 2030 government bonds performed slightly stronger, with the yield falling 0.5 basis points to 9.95%.