Forex

Rand Jumps 1.6% as ANC Faces Historic Coalition Negotiations

Published

5 months ago

June 4, 2024

The South African rand surged by 1.6% on Monday, its most significant one-day gain since December 14.

This rebound is fueled by investor optimism that the country’s coalition talks will culminate in a market-friendly government.

The rise in the rand, coupled with strong performances in South African stocks and bonds, signals a wave of confidence sweeping through financial markets.

For the first time in three decades, the ruling African National Congress (ANC) failed to secure a majority, obtaining only 40.2% of the vote.

This unprecedented outcome has opened the door to various coalition possibilities, some of which were previously deemed unlikely.

Alliances with the left-leaning Economic Freedom Fighters (EFF) or the newly formed uMkhonto weSizwe Party (MKP) are now on the table.

However, investors are particularly hopeful for a coalition with the largest opposition party, the Democratic Alliance (DA), which is seen as more conducive to economic stability and reform.

“Our perception is that the market views a potential coalition with the DA as overall benign albeit fragile,” commented Yvette Babb, a portfolio manager at William Blair Investment Management. “A formal alliance with the DA would be most supportive and perhaps give rise to a rally in asset prices. However, we believe there may be an enduring rise in the South African risk premium given the increase in implementation risks.”

South African assets experienced significant volatility during the initial hours of trading on Monday but ended the day on a more stable footing.

The FTSE/JSE All Share Index concluded the day as the second-best performing equity gauge in dollar terms among the 92 indexes monitored by Bloomberg.

Moreover, South Africa’s dollar bonds were among the top performers in Bloomberg’s index of emerging and frontier sovereign Eurobonds.

Finance Minister Enoch Godongwana assured that the ANC would not make reckless decisions in selecting a coalition partner, emphasizing the importance of maintaining investor confidence and economic policy continuity.

Current coalition discussions involve potential alliances with the EFF, the MKP, and the DA.

The ANC has ruled out a demand by the MKP that President Cyril Ramaphosa step down, considering instead a minority government or a “confidence and supply” agreement to ensure stability.

Citigroup’s economist Gina Schoeman noted that a minority government led by the ANC would create “parliamentary uncertainty and instability.”

A pact with the DA, on the other hand, would be welcomed by financial markets, potentially accelerating economic reforms and privatization initiatives. Many analysts consider this scenario to be more likely.

Despite the setback at the polls, the ANC remains South Africa’s largest party. Investors are cautiously optimistic that a coalition with the DA will emerge, fostering a conducive environment for economic growth.

Sebastien Barbe, head of emerging market research at Credit Agricole, pointed out that while the rand’s current levels are not particularly stretched, the political uncertainty adds to downside risks.

“The higher risk premium that would arise as a result of a coalition between the ANC, EFF, or the MKP is reason alone to not enter such a coalition,” Schoeman said, attributing only a 15% probability to this outcome. Barbe added, “The rand at current levels is not particularly stretched, and the carry is decent, so this may limit some possible depreciation pressure that would come from political uncertainty.”

As the deadline of June 17 for swearing in a new government approaches, investors and analysts alike will be closely monitoring the coalition talks.

The outcome of these negotiations will undoubtedly have far-reaching implications for South Africa’s economic trajectory and investor sentiment in the coming months.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Naira Appreciates 3.6% on US Dollar, Trades N1,600

Published

2 days ago

October 19, 2024

Iyanuoluwa Martins

Naira to Dollar Exchange- Investors King Rate - Investors King

The Naira rose 3.6 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX) to exchange at N1,600.78/$1 on Friday, October 18 as the local currency appreciated amid an increased supply.

The domestic currency gained N59.71 on the American currency versus N1,660.49/$1, which it closed in the previous session on Thursday.

Data showed a rise in supply as the turnover published on the FMDQ Group website stood at $350.72 million indicating that the session’s turnover rose by 6.2 percent, indicating a rise of $20.54 million compared to $330.18 million that was published in the last trading session.

Meanwhile, the Naira witnessed a flat outcome against the Pound Sterling and the Euro as it closed on the British currency at N2,153.90/£1 and on the European currency at N1,791.06/€1 quoted in the preceding session.

In the Parallel market, the Naira weakened on the American currency as it closed at N1,690.82 to the US Dollar, a drop of N1.31 compared to N1,689.51/$1 it closed during the Wednesday trading session.

In the past months, the Naira has been volatile against the Dollar at the FX market despite interventions by the Central Bank of Nigeria.

The World Bank also said the Nigerian Naira is among the worst-performing currencies in sub-Sahara Africa at the end of August 2024.

In its latest edition of Africa’s Pulse report, the international organisation said the Naira is at par with the Ethiopian Birr, and South Sudanese Pound in terms of decline in the region.

However, the local currency appreciated in its value against the British Pound Sterling in the official market by N54 to sell at N2,201.93/£1 compared with the preceding session’s N2,147.93/£1 and followed the same pattern against the Euro as it gained N4.58 to quote at N1,835.29/€1 versus the previous day’s rate of N1,839.87/€1.

The local currency also depreciated N16.11 to close at N1,217.18 per Canadian Dollar, compared to Thursday’s N1,201.07 per CAD.

Black Market Rate

Naira Gains on Dollar, Pounds, Others at Black Market, Falls at NAFEX

Published

4 days ago

October 18, 2024

Iyanuoluwa Martins

The Naira gained against the US Dollar in the Parallel segment of the foreign exchange market on Thursday, October 17 as it closed at N1,689.51 to the American currency, a gain of N4.41 compared to N1,693.32/$1 it closed during the Wednesday trading session.

The Naira also gained in its value against the British Pound Sterling in the market by N11.19 to sell at N2,147.93/£1 compared with the preceding session’s N2,159.12/£1 and followed the same pattern against the Euro as it appreciated N8.07 to quote at N1,839.87/€1 versus the previous day’s rate of N1,847.94/€1.

The local currency also appreciated N3.59 to close at N1,201.07 per Canadian Dollar, compared to the previous day’s closing value of N1,204.66 per CAD.

Meanwhile, the Naira depreciated marginally for yet another session against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) to N1,660.49/$1.

The local currency rose fell by 0.05 per cent or N91.01 at the window, according to data obtained from FMDQ Securities Exchange compared to N1,659.69/$1 published in the preceding session on Wednesday.

This occurred as supply rose at the penultimate session as turnover published on the FMDQ Group website stood at $330.18 million indicating that the session’s turnover jumped by 86.4 per cent, indicating that there was a decrease of $153.08 million compared to $177.10 million published the previous day.

The surge in supply could be due to peer-to-peer sales as the Central Bank of Nigeria (CBN) has no actively injected liquidity in the market.

Investors King reports that the CBN in August re-introduced the retail Dutch auction system with the aim to sell US Dollar to FX users on demand basis but after the market witnessed more than $1.1 billion injected into the system, there has been slowdown in the auction.

In a different pattern, the local currency closed flat against the Pound Sterling and depreciated on the Euro at the closing session.

Trading against the British currency, the local currency closed at N2,153.90/£1 while it closed at the rate of N1,791.06/€1, a N9.73 appreciation against N1,800.79/€1 against the Euro.

Naira

Naira Drops 0.04% to N1,659.69/$1 at Official FX Market, Dips at Parallel Market

Published

5 days ago

October 17, 2024

Iyanuoluwa Martins

The Naira fell to N1,659 per Dollar on Wednesday in the official foreign exchange market, the Nigerian Autonomous Foreign Exchange Market (NAFEX).

The local currency fell by 72 Kobo or 0.04 percent to close at N1,659.69/$1 compared with Tuesday’s closing rate of N1,658.97/$1.

The market continued to weigh the recent inflation rise after the National Bureau of Statistics (NBS) on Tuesday said Nigeria’s inflation rose to 32.70 percent in the month of September, the first time after moderating in July and August.

Analysts from the World Bank ranked Nigerian Naira as among the worst-performing currencies in sub-Sahara Africa in 2024, noting that the local currency has lost about 43 percent.

The World Bank, in its latest edition of Africa’s Pulse report, disclosed that the Naira is at the same level with the Ethiopian Birr, and South Sudanese Pound in terms of decline in the region.

The report disclosed that the continued increase in the demand for Dollars and limited Dollar inflow is responsible for Naira depreciation in the last months.

The daily supply of FX as measured by secondary data from FMDQ Securities Exchange Limited indicated that turnover slumped by $40.85 million or 18.7 percent to $177.01 million from $217.86 million.

The Naira weakened its value against the Pound Sterling in the official market by N64.28 to sell at N2,153.90/£1 compared with the preceding session’s N2,089.62/£1.

It followed the same route against the Euro as it depreciated N51.67 to quote the midweek session at N1,800.79/€1 versus the preceding rate of N1,749.12/€1.

In the Parallel market, the Naira weakened on the American currency as it closed at N1,693.32 to the US Dollar, a drop of N29.61 compared to N1,663.71/$1 it closed during the Wednesday trading session.

The Naira also dropped in its value against the British Pound Sterling in the official market by N38.17 to sell at N2,159.12/£1 compared with the preceding session’s N2,120.95/£1 and followed the same pattern against the Euro as it depreciated N31.51 to quote at N1,847.94/€1 versus the previous day’s rate of N1,816.43/€1.

The local currency also depreciated N7.07 to close at N1,204.66 per Canadian Dollar, compared to Tuesday’s N1,197.59 per CAD.