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The South African rand is nearing an all-time low against the U.S. dollar during early trading on Wednesday, pressured by global market anxiety and domestic political strife. The currency fell to 19.8225 to the dollar, close to its record low of 19.9075 from June 2023, before slightly recovering to 19.73 by 0655 GMT—up 0.2% for the day but down over 3% this week.
Global risk aversion has surged due to the intensification of the U.S. tariff war, with President Donald Trump’s significant tariffs on multiple countries, including a notable 104% on Chinese imports, taking effect on Wednesday. This global market turmoil has added to the rand’s vulnerability to investor sentiment shifts.
Further complicating matters are rising concerns regarding the stability of South Africa’s Government of National Unity (GNU). The two main parties in the coalition are clashing over the national budget, with the junior partner not only voting against it in parliament but also pursuing a legal challenge. While both parties stated on Tuesday that they remain committed to the coalition, uncertainty persists, particularly concerning the pro-business Democratic Alliance’s potential departure, which has alarmed investors.
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ETM Analytics highlighted that local developments regarding the GNU have exacerbated the decline of the rand. The political instability has also affected the bond market, with the yield on the benchmark 2030 government bond increasing by 13 basis points to 9.33% in early trading.
As global trade tensions escalate and South Africa’s fragile coalition faces mounting challenges, market observers anticipate further volatility. The rand’s current trajectory highlights the escalating challenges faced by emerging markets amid geopolitical instability and domestic uncertainties.
