The South African rand fell on Tuesday as uncertainty around possible coalition partners persisted, a week after an election which saw the African National Congress lose its parliamentary majority for the first time in 30 years.
At 1414 GMT, the rand traded at 18.6475 against the dollar , about 0.7% weaker than its closing level on Monday.
The dollar last traded around 0.21% stronger against a basket of global currencies.
“While we are seeing some strength returning to the dollar in a risk off start to the day, the rand has underperformed a broad basket of its currency peers, suggesting continued angst with regards to coalition uncertainties which persists,” said Shaun Murison, a senior market analyst at IG.
The ANC was holding high-stakes internal talks on Tuesday about which parties it should approach to form South Africa’s next government, with diametrically opposed Marxists and free-marketeers on the menu of options.
Also Read: ANC party that freed South Africa from apartheid loses its 30-year majority in landmark election
Political parties have two weeks to work out a deal before the new parliament sits and chooses a president, still likely to be ANC leader Cyril Ramaphosa since the party remains the biggest force.
“The rand today is erring on the side of caution, pricing in some of the economic risks a business unfriendly coalition may provide,” Murison added.
South Africa’s economy recorded a small contraction in the first quarter of 2024, statistics agency data showed on Tuesday, hurt by a slump in the mining and construction sectors.
Murison said the GDP data release had little impact on the local currency.
Shares on the Johannesburg Stock Exchange reversed some gains made on Monday, with the blue-chip Top-40 (.JTOPI) index about 1% weaker on the day.
South Africa’s benchmark 2030 government bond was marginally stronger, with the yield down 0.5 basis point to 10.57%.
By Agencies.
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