Rand Faces Volatility As Election Results Roll In


By Joburg Post

The rand firmed in mid-morning trade on Thursday (9 May), as national election results began to trickle through with current data showing that the ruling African National Congress (ANC) is enjoying an early lead.

The rand gained 0.30% by 10h30 on Thursday, with approximately 30% or 4.1 million votes counted, and a voter turnout rate of 65%.

“Voting day has come and gone and the rand’s trading pattern remains intact: a stronger ZAR is witnessed in overnight trade and non-trading days in SA, with the unit reaching a high of R14.30/$ yesterday,” said Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions.

Global markets remain largely focused on the US-China trade dynamic, the currency analyst said.

“The key focus now is on the election outcome while we will keep an eye on data such as local gold, mining and manufacturing production data today, while the US will release jobless claims and PPI.”

Botes forecast some volatility in the rand as the election results become known, with an intraday range of R14.30 to R14.48.



“Walking into the office this morning, after the day of voting yesterday, not a lot has changed in the past 36 hours,” said Andre Botha, senior dealer at TreasuryONE.

“With the national election going off without much of a hitch, we expect some of the risks that were priced into the rand to subside a little and we could see the Rand drifting lower but it needs impetus from offshore for a sustained rally. Looking at early results it seems that the ANC will win the election as expected with around 54-57% of the vote.

“This will give enough power to the ANC to enact policy reforms and this should be rand positive,” Botha said.

However, for the rand to sustain its gains in the medium terms, it needs help from the US-China trade deal.

“The current situation does not help the Rand at all with the trade deal being in limbo and the threat of further tariffs being imposed will in all likelihood negate the election positives and we could see further range-bound trading for the rand in the short term. Should the rand break below R14.25 the momentum would change and we could see the rand trying the R14.00 level,” Botha said.

The rand traded at the following levels against the major currencies:

Dollar/Rand: R14.42 (0.31%)
Pound/Rand: R18.73 (0.13%)
Euro/Rand:R16.12 (0.21%)
Data published by Bloomberg showed that since the start of the post-apartheid era, the rand has tended to strengthen in the month before the vote – but weaken in the 30 days afterwards.

The outlier was 2009, when the rand was recovering from a record low reached during the global financial crisis.

-JP

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