As the dust settled on Friday on South Africa’s hotly contested local elections, Thursday’s narrative that the country’s currency was heading for “record highs” started to look a little hopeful, but South African assets did gain ground for a third day in a row.
Bloomberg said on Friday that the rand continued to strengthen, rising 0.2% to 13.6780 to the dollar, the strongest level on a closing basis since October.
Yields on government rand bonds fell to their lowest since November, dollar yields declined and the cost of insuring the nation’s debt against default fell to a nine-month low. Indications were that the gains would be extended as the final numbers came in.
Voters delivered a strong message to the ruling party, which suffered losses across the board and especially in key urban areas.
The bruising at the polls comes on the back of protests over lack of service delivery in a country where the political elite look increasingly removed from the people, whose lives are deteriorating in an environment of high employment and near zero growth.
As the ANC looked set to lose control of South Africa’s financial heartland, Bloomberg said it expected the bruising to add to pressure on the party to introduce economic reforms that would boost growth and cut unemployment.
The rand also strengthened in relation to the pound. As South Africa’s calm and orderly election underpinned a firming of the rand the Bank of England appeared to take a sledgehammer to concerns raised by Brexit, the British people’s vote to leave the European Union.
The central bank on Thursday cut borrowing costs, boosted its QE scheme and committed an extra £100bn to encourage banks to lend, which was widely described as “spooking” the market and causing the pound to lose value.
– African News Agency (ANA)