Rand Soars as DA and ANC Strike Unity Deal

South Africa's rand appreciated after the Democratic Alliance and the African National Congress struck a deal to form a unity government with the Inkatha Freedom Party. This coalition reassures investors by excluding radical parties. The rand traded at 18.40 against the dollar, up 0.2% from its previous close.

South Africa's rand gained on Friday after the Democratic Alliance said a deal had been struck with the African National Congress to form a unity government. The DA reached an agreement with the ANC and the Inkatha Freedom Party (IFP) after two weeks of negotiations following last month's election, DA leader John Steenhuisen said.

"The rand is loving it!" said Danny Greeff, co-head of Africa at ETM Analytics. Analysts said markets also welcomed the exclusion of the far-left Economic Freedom Fighters and former President Jacob Zuma-backed populist uMkhonto we Sizwe (MK) parties.

"News of this coalition will temper concerns that South Africa would embark on a policy approach challenging the mainstream economic consensus," said Markus Korhonen, senior associate in strategic intelligence at S-RM. At 1614 GMT, the rand traded at 18.40 against the dollar , around 0.2% stronger than its previous close.

The ANC lost its parliamentary majority in the May 29 election, for the first time since coming to power at the end of apartheid 30 years ago. "While the sustainability of an ANC-DA-IFP coalition is, of course, questionable, investors will cheer the fact that radical parties have been excluded," Greeff said.

In the first post-election parliament sitting, lawmakers will later on Friday elect the president. The ANC's Cyril Ramaphosa is likely to be re-elected. On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed around 0.7% stronger. South Africa's benchmark 2030 government bond was flat at 10.125%. (Editing by Gareth Jones, Susan Fenton and Alexander Smith)