Traders increased wagers on further rand depreciation following the African National Congress’s announcement of its intention to establish a government of national unity, having lost its parliamentary majority.
South African rand hedging costs for the next 12 months soared on Friday to their highest level of the year.
In the spot market, the currency saw its first day of gains in four, but it was still headed for its third consecutive weekly decline against the dollar.
South Africa’s rand plummeted as election projections revealed a significant drop in support for the ruling African National Congress (ANC), sparking concerns about potentially chaotic coalition negotiations and causing unease among investors.
The currency experienced a sharp decline of up to 1.7%, trading at 18.7287 per dollar as of 10:20 a.m. in Johannesburg last week.
Concurrently, the yield on local-currency bonds maturing in 2035 surged by 19 basis points to 12.24%, indicating a jittery response from the financial markets to the election developments.