JOHANNESBURG (Reuters) – South Africa’s rand gained on Friday due to record high gold prices that were driven by investors seeking safe haven assets amid worries over a global trade war.
At 1457 GMT, the rand traded at 18.1850 against the dollar, about 0.7% firmer than its previous close. The South African currency had fallen earlier this week on domestic political tensions sparked by a revised national budget.
“The rand is ending the week on a strong note, bolstered by global market sentiment rather than domestic developments, despite uncertainty surrounding the ratification of the proposed budget,” said Zain Vawda, market analyst at MarketPulse by OANDA.
Gold surged on Friday as investors piled on to a historic rally in the safe haven asset to seek cover from economic uncertainty sparked by U.S. President Donald Trump’s tariff war.
Trump’s policies have unsettled global markets after he threatened a 200% tariff on wine, cognac and other alcohol imports from Europe, escalating a global trade war that has worried financial markets and raised recession fears.
The rand’s strength has more to do with the record gold price and strong commodity prices than anything relating to the budget, said Roy Topol, portfolio manager at Cratos Capital.
The commodity-backed rand often takes cues from global drivers like U.S. policy, but failed to capitalise on the dollar’s weakness for much of this week amid domestic political and budgetary spats.
Finance Minister Enoch Godongwana tabled the 2025 budget on Wednesday, in which he proposed raising value-added tax (VAT) by 0.5-percentage-point this year, followed by another 0.5-point hike next year.
Major political parties publicly rejected this proposal, after rebuffing Godongwana’s initial 2-percentage-point VAT hike three weeks ago.
Analysts said budget uncertainty raises fiscal risk which slows interest rate cut expectations. Investors will next week focus on the South African Reserve Bank’s interest rate decision.
A poll by Reuters on Friday found that the central bank will likely keep interest rates steady as global trade risks and battles over the national budget keep policymakers in wait-and-see mode.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed up 1%.
South Africa’s benchmark 2030 government bond was weaker, with the yield up 5.5 basis points to 9.165%.
(Reporting by Tannur Anders and Sfundo Parakozov; Ediding by Mark Potter and Leroy Leo)
