The South African rand strengthened against the U.S. dollar on Wednesday, as market uncertainty shook the greenback due to concerns about U.S. tariffs and the political situation in South Africa. By 7:57 a.m. GMT, the rand was trading at 18.9425 to the dollar, showing an improvement of about 0.4% from its previous closing price. The U.S. dollar, meanwhile, was down by 0.7% against a group of other currencies.
The uncertainty in the foreign exchange market has been largely driven by ongoing tensions between the U.S. and China, which is South Africa’s largest trading partner. The U.S. tariffs on China have caused instability, and the impact on the dollar has been noticeable over recent weeks. According to Andre Cilliers, a currency strategist at TreasuryONE, there has not been any significant update on the tariff situation overnight, but the trade conflict between the U.S. and China is still growing, adding to the unpredictability in global markets.
For South African investors, the focus is on the latest business confidence index for March, which is scheduled to be released at 9:30 a.m. GMT, as well as retail sales data for February set to be published at 11:00 a.m. GMT. These reports, along with the ongoing discussions about the country’s budget crisis, are being closely monitored.
The two largest political parties in South Africa’s coalition government have been in disagreement over a proposed increase in value-added tax (VAT), which is expected to take effect on May 1. This dispute has added to the uncertainty surrounding South Africa’s economic outlook, especially as both parties struggle to reach a compromise on the matter.
ETM Analytics, a research group, noted that while the rand’s recovery in the near term seems to have largely played out, the currency could strengthen further if there are positive developments from the government regarding a budget that all political parties can support. Any positive news on this front would be a welcome sign for investors and could help stabilize the economy.
On the Johannesburg Stock Exchange, South Africa’s main stock index, the Top-40, remained largely unchanged in early trading. Meanwhile, the country’s 2030 government bond showed some improvement, with its yield dipping by 1 basis point to 9.21%.
