MARKET WRAP: Rand firms ahead of Ramaphosa inauguration

The rand was firmer on Tuesday, holding to its best gains since May as investors welcomed the re-election of President Cyril Ramaphosa.

President-elect Cyril Ramaphosa will be inaugurated on Wednesday. This will mark the seventh administration since the start of democracy in SA in 1994. The president’s re-election comes after the ANC, DA, Patriotic Alliance, IFP and GOOD agreed to join the government of national unity (GNU), which has 273 seats in the National Assembly, or 68%.

The ANC said in a statement on Monday that discussions with other parties were continuing “in the spirit of inclusivity”.

Business Day understands that Ramaphosa may announce the members of his new cabinet after his inauguration.

“Following a momentous week in the domestic political landscape last week amid the formation of a new GNU, the rand begins the public holiday-shortened trading week on firm footing amid dissipating political uncertainty,” RMB analysts said.

RMB head of forex execution Matete Thulare said the new government was expected to set a platform for accelerated infrastructure and other reforms, “to get the economy back on track after years of low growth and high unemployment”.

At 5.45pm, the rand had strengthened 0.95% to R18.0737/$, 0.92% to R19.4016/€ and 0.9% to R22.9813/£. The euro was little changed at $1.0736.

Andre Cilliers, currency strategist at TreasuryOne, said markets were digesting the ANC’s loss of its majority in the government, adding that “the rand is expected to start realigning with global markets and follow international events, tracking more of the move seen in the dollar”.

Globally, stock markets received a boost as bond yields eased. Treasury yields declined after a report indicating that US retail sales rebounded in May but still fell short of economists’ forecasts. This development is seen as a positive sign for the Federal Reserve, which is seeking a delicate balance in the economy by raising interest rates to combat inflation while avoiding excessive economic slowdown, according to Bloomberg.

According to data from CME Group, traders are betting that the Fed will cut rates at least once in 2024 and possibly twice.

“Markets continue to keep an eye out for data for any signs about the US economy cooling and potential Fed rate cuts,” said Cilliers.

The JSE all share rose 3.5% to 79,748 points and the top 40 3.32%.

At 6.10pm, the Dow Jones industrial average added 0.35% to 38,825 points, while the S&P 500 had gained 0.17%. Markets were firmer in Europe.

tsobol@businesslive.co.za