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The South African rand weakened in early trade on Friday, extending the previous day’s losses to hit its lowest level since late October, with analysts citing the impact of this week’s 2024 budget on investor sentiment.
At 0800 GMT the rand traded at R19.2350 against the US dollar, about 0.3% weaker than its previous close.
The dollar index was little changed.
The rand initially strengthened after the finance minister’s annual budget presentation on Wednesday, but the gains were short-lived.
The minister, Enoch Godongwana, announced that government would draw down R150 billion ($7.8 billion) from contingency reserves at the central bank over the next three years to limit rising debt, but he offered little in the way of broad structural reforms to fix problems such as high unemployment and stagnant economic growth.
“Once everyone has had a chance to dissect the data and assess it for what it is, it is not surprising to see the general reaction and narrative turn negative,” ETM Analytics said in a research note.
2024 Budget Speech:
The dollar, meanwhile, was supported by a senior U.S. Federal Reserve official saying that the Fed should be in no rush to reduce interest rates, which also contributed to the rand’s weakness, ETM added.
South Africa has elections on May 29 in which the governing African National Congress (ANC) party is widely predicted to lose its parliamentary majority for the first time in 30 years, which analysts say has made some investors cautious.
Election date set for 29 May 2024: Lulu White:
