Rand faces volatility as election results roll in

The rand is expected to face some volatility as the election results start to trickle in, say analysts. 

"Voting day has come and gone and the rand's trading pattern remains intact: a stronger rand was witnessed in overnight trade and during non-trading days in SA, with the unit reaching a high of R14.30/$ yesterday. We expect some volatility in the rand as the election results become known, with an intraday range of R14.30 to R14.48," said Peregrine Treasury Solutions's Bianca Botes in a morning note to clients. 

By 09:37, the rand was trading at R14.38 to the greenback, after opening at R14.37. 

The rand strengthened for the second day on Wednesday as South Africans went to the polls.

However, Botes also said that renewed tension between the US and China over trade does not bode well for the rand.

Senior Dealer at TreasuryONE Andre Botha also echoed these sentiments. "The US dollar also traded within in very narrow bands as the market is still awaiting any further news from the US-China trade talks fallout. The EUR/USD traded around the 1.1200 level for most of the day and to further echo the dull trading day that we saw yesterday the Dow Jones ended up by 0.01%.

"With the national election going off without much of a hitch, we expect some of the risks that were priced into the rand to subside a little and we could see the rand drifting lower but it needs impetus from offshore for a sustained rally," he said.

Botha went on to say that in terms of the early election results, the ANC was expected to secure between 54-57% of the vote, which would give the ruling party sufficient power to enact policy reforms which should be rand positive.

"However, for the rand to sustain its gains in the medium term, it needs help from the US-China trade deal. The current situation does not help the rand at all with the trade deal being in limbo and the threat of further tariffs being imposed will in all likelihood negate the election positives and we could see further range-bound trading for the rand in the short term.

"Should the rand break below R14.25 the momentum would change and we could see the rand trying the R14.00 level.”

Botes added that the markets will also keep an eye on local data such as local gold, mining and manufacturing production due out today while the US was expected to release jobless claims and producer price index. 

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