The rand surged to R18.32/$ on Friday morning, surpassing pre-budget levels and recovering losses following the rejection of South Africa’s national budget earlier in the week. The currency had briefly weakened to R18.59/$ after Finance Minister Enoch Godongwana’s budget proposal was delayed due to a dispute over a proposed VAT increase. Despite this uncertainty, market sentiment turned positive as the rand rebounded, supported by a struggling US dollar.
Economist Casey Sprake of Anchor Capital highlighted that although markets generally dislike uncertainty, the budget delay might indicate increased accountability in South Africa’s political system. This could signal a move towards more inclusive decision-making, potentially fostering long-term economic reforms. The rand’s recovery was further aided by the US dollar’s struggles, as the dollar index fell by 1.8% in February, its biggest monthly drop since September.
US economic data, including strong earnings and a resilient economy, have dampened traders’ appetite for the dollar, especially after President Donald Trump’s tariff threats failed to materialize. Despite some targeted tariffs, including a 10% duty on Chinese imports, the dollar has underperformed, contributing to a more favorable environment for emerging-market currencies like the rand.
The yen also saw a notable rally against the dollar, adding to the trend of the greenback’s weakness. Meanwhile, the euro struggled after disappointing business activity data from France and only mild improvement in Germany, the eurozone’s largest economies.