The rand’s prolific rally has gathered pace after the ruling African National Congress suffered its worst election results since the end of apartheid last week, propelling the currency to a 10-month high.

The rand has climbed another 0.2 per cent against the dollar today to ZAR13.5595, its strongest level since October. It is up 3.6 per cent over the last week, and has surged more than 24 per cent since touching a record low in January, writes Joel Lewin.

Jacob Zuma’s ruling ANC party was rocked by local elections last week, when its nationwide support slipped to 53.9 per cent, the lowest since the end of the apartheid era in 1994.

Opposition parties made impressive gains as voters turned their backs on the ANC amid high unemployment and persistent corruption scandals.

Luis Costa at Citi said the 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”.

This suggests market-roiling incidents such as the December firing of well-respected finance minister Nhlanhla Nene, which caused the rand to slump, are less likely to be repeated.

“The implications of this week’s election outcome are market-friendly and we expect the ZAR to continue outperforming EMFX in the near-term,” said Mr Costa.

Disappointing second quarter US growth data has pushed expectations for the next Federal Reserve interest rate rise back into next year, putting downwards pressure on the dollar and giving emerging market currencies a further lift.

The plunge in developed market bond yields, which has picked up in the wake of the Bank of England’s rate cut, has driven an exodus into emerging markets, where bonds offer an alluring pick up. The rand has been a particular beneficiary of this, shift, says Mr Costa, who notes that “part of the rand’s support will continue to come from relatively attractive SAGB valuations.”

This, combined with strong metal prices – iron ore has surged to a three-month high- and mildy rebounding oil prices, have created an ideal backdrop for the rand.

The South African currency has surged 8.7 per cent against the greenback so far this quarter, racing ahead of other emerging market currencies.

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