South Africa‘s rand weakened early on Friday as most emerging market currencies retreated against a dollar lifted to near two-week highs by positive US economic data.
At 0700 GMT the rand was 0.23% weaker at 14.32 per dollar compared to an overnight close of 14.28, with investors also awaiting the appointment of a new South African cabinet before making big calls on the currency.
The greenback brushed off concerns over the latest escalation in the United States’ trade standoff with China, climbing as housing starts increased more than expected and the labour market showed resilience.
While the rand remains one of the best performing emerging currencies this year, more so after last week’s general elections put President Cyril Ramaphosa on firmer ground to pursue economic reforms, investors are edgy about next week’s cabinet announcement.
“Much depends on SA’s political construct and the all-important cabinet announcement next week, which will determine whether growth-enhancing policies and structural reform are in fact achievable over the next five years,” RMB analyst Nema Ramkhelawan-Bhana said in a note.
Ramaphosa unveils his cabinet on May 27 after his African National Congress clinched a 57.5% majority in a parliamentary and provincial vote that nevertheless saw the former liberation party’s overwhelming dominance take its hardest hit yet.
Bonds were also weaker, with the yield on the benchmark 10-year government issue adding 4 basis points to 8.485%.
A Reuters poll of economists and analysts this week found the central bank will leave interest rates unchanged next week, while 2019 economic growth is seen at 1.1% from 0.8% last year.