South African rand gains 0.4% on softer oil as ANC coalition talks stay in focus

The South African rand strengthened in early trade in Johannesburg on Monday, Nov 9, as softer oil prices helped ease inflation concerns. Investors also assessed local municipal election results and coalition talks. At 0642 GMT, the rand traded at 16.4875 against the dollar, up about 0.4% from its previous close.

Oil and inflation

Oil prices steadied on Monday after US President Donald Trump suggested new attacks on Iran were unlikely. Supply concerns lingered as vessels near the Strait of Hormuz came under attack. South Africa is a net importer of fuel and is highly exposed to global oil price movements. Sustained increases in crude prices can raise domestic fuel costs, stoke inflation and add pressure on the rand. Softer oil prices can ease some of that pressure, but the currency remains sensitive to crude market moves.

ANC loses ground

The African National Congress (ANC) suffered a significant setback in last week’s municipal elections, according to results released on Sunday. The outcome weakened its position in coalition negotiations to form city governments. The political uncertainty kept investors focused on how city governments will be formed.

ETM Analytics said the balance of risks remains tilted against the ZAR in the coming week. “Investors will continue to focus on offshore equity market developments as a barometer of risk appetite, while coalition negotiations will serve as a reminder that, although the ANC lost ground, SA’s municipal and metropolitan political landscape will remain difficult to manage,” the firm said.

Bond market flat

South Africa’s benchmark 2035 government bond was flat in early deals, with the yield at 8.3%.