The rand has had a poor start to the week and fell on Tuesday evening as uncertainty grows around possible coalition partners with the African National Congress (ANC).
The rand was trading at around R18.70 at the close of business on Tuesday evening.
Reuters said this was more than 0.7% weaker than its closing level on Monday.
Shaun Murison, a senior market analyst at IG, said that the rand has underperformed when compared to a broad basket of its currency peers.
He said that this suggested continued angst with regard to coalition uncertainties as the ANC tries to navigate creating a government after not achieving an outright majority at the polls.
“The rand was erring on the side of caution, pricing in some of the economic risks a business unfriendly coalition may provide,” Murison added.
Anchor Capital also noted that the rand was weakened against the dollar due to the first quarter (Q1) of 2024.
Yesterday, Statistics South Africa (StatsSA) said that a slump in the mining and construction sectors hurt the economy.
Gross domestic product (GDP) shrank 0.1% in Q1 due to a decline in the production sectors of the economy.
On Tuesday, the rand has recovered somewhat and was trading at R18.68 at 9:20am.
The rand was trading at around R20.37 to the euro and at around R23.93 to the pound.
Patchy economic growth
Nedbank noted in their Economic Insight’s Report that SA faces another year of patchy economic growth, given harsh operating conditions on the supply front, weak domestic demand, and a constrained global landscape.
The bank predicts that in the first half of 2024, high interest rates will continue to strain household finances, weighing on consumer confidence and demand.
Soft demand and lower international commodity prices will undermine production across sectors on the global front, the report said.
Nedbank said that it expects these pressures to start easing slightly in the second half, as inflation shifts down a gear and the monetary policy easing cycle begins.
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