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JOHANNESBURG – The South African rand extended gains in early trade on Tuesday, bolstered by bets that the country’s coalition government will remain intact despite disagreements over the budget.
At 0725 GMT the rand traded at 18.84 against the U.S. dollar , about 0.4% firmer on the day.
The rand fell to a record low last Wednesday on risk aversion over U.S. President Donald Trump’s trade war and concerns that South Africa’s national unity government could split.
But it has recovered sharply since, helped by signs that the coalition partners are trying to resolve the budget impasse and a Sunday news report that the biggest political party, the African National Congress, may back down on a plan to raise value-added tax, the budget’s most contentious element.
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“News doing the rounds that the ANC may backtrack on their VAT increase as support from the other smaller parties is waning has … helped the local unit to better levels,” Rand Merchant Bank analysts said.
Analysts cautioned that Trump’s changing tariff plans were likely to be a source of ongoing volatility. But they said the rand’s recovery could have further to run if local political headlines stay positive.
South Africa’s benchmark 2030 government bond was marginally stronger in early deals, as the yield fell 2 basis points to 9.195%. (Reuters)
