The South African rand has lost over 7% against the dollar in May due to blackouts and arms allegations.
The U.S. bill to suspend debt ceiling could reduce risk aversion and boost riskier investments.
Global factors, like U.S. policy, often influence the rand's performance, and investors are watching the situation closely.
Harare-The South African rand has been battered over the past month due to souring investor sentiment, but remained relatively unchanged in early trading on June 1st. The currency had hit an all-time low of 19.8600 against the dollar on Tuesday, but as of 0628 GMT on Thursday, it was trading at 19.7500, around 0.14% weaker than its previous close.
Investors have been concerned about the worsening rolling blackouts in South Africa, as well as allegations that the country had supplied arms to Russia last year. These issues have caused the rand to lose over 7% against the dollar throughout May, but the currency's decline may be slowing.
The U.S. House of Representatives passed a bill to suspend the $31.4 trillion debt ceiling, which could have led to a recession if failed to pass. The U.S. Senate is now reviewing the legislation, and if enacted, it could reduce the degree of risk aversion and potentially trigger a move back towards riskier investment destinations, according to ETM Analytics in a research note.
In the absence of major local economic data, the rand often takes cues from global factors like U.S. policy. South Africa's benchmark 2030 government bond remained flat in early trading at 11.300%. The situation remains fluid, and investors will be watching developments in the U.S. and South Africa closely in the comingdays.
Despite the challenges facing the South African rand, there is hope that the worst may be over. The currency has been hit hard by a combination of local and global factors, but with the potential passage of the U.S. debt ceiling bill, there may be a shift towards riskier investment destinations. Investors will be closely monitoring the situation in South Africa and the U.S., as any major developments could have a significant impact on the currency's performance.
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