Rand hits 10-month high vs the dollar – R13.35

South Africa’s rand hit a fresh 10-month high against the dollar in early trade on Wednesday as emerging markets continued to gain against the US currency.

The Financial Times reported that the rand continued to benefit from the results of the local municipal elections – which saw the ANC weakened substantially, losing several major metros.

Reuters noted that the rand touched R13.3520 versus dollar earlier in the session, its strongest level since 23 October 2015. By 09h30, it was trading at R13.38 against the US unit.

The rand was flat against the pound and euro trading at R17.40 and R14.91 respectively.

Adam Phillips of Umkhulu Consulting said that weak US productivity numbers for the April to June period also supported emerging market currencies, as reported by News24.

He said the market does not even seem to consider what coalitions are going to come about because of the local elections.

“In terms of charts and technicals, there seem to be little support until we get to 13.10 on the ZAR. Given where we have been this year, this is an extraordinary move reminiscent of late December 2001 and all the way through 2002.”

Luis Costa at Citi Bank however, told the FT that the local election results are “being read as net positive by market participants because it is construed as a signal that president Zuma’s power is dwindling”.

The suggestion is that events like the axing of former finance minister Nhlanhla Nene, in December, are less likely to be repeated. “The implications of this week’s election outcome are market-friendly,” said Costa.

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Rand hits R13.75 vs the dollar as early election results show a weaker ANC