(Witthaya Prasongsin/Getty Images)

The rand weakened from R18.90 to close to R19.00 on Thursday evening in the immediate aftermath of president Cyril Ramaphosa’s announcement that he will invite the DA, EFF, IFP and smaller parties to co-govern South Africa in a Government of National Unity (GNU).

However, the SA currency regained some of its losses overnight. On Friday morning, it was trading at around R18.92. Earlier on Thursday, it briefly hit R19.00 against the dollar.

A GNU agreement will include measurable targets for economic growth, inclusion, service delivery and development. All parties to the GNU will have to commit to “shared values of nation building and social cohesion”.

Parties that want to serve in the Cabinet must have “respect for the Constitution and the rule of law; for social justice, non-racialism and non-sexism”.

“A government of national unity, which would include everyone, including EFF, would be seen as disappointing,” Mamokete Lijane, global markets strategist at Standard Bank Corporate and Investment Banking, previously told Bloomberg. “The ongoing uncertainty makes people uncomfortable.”

The rand and other SA-focused shares – particularly local banks and retailers – rallied after initial reports that the ANC was considering an alliance with the DA.

However, ANC structures and the party’s alliance partners pushed back against a deal with the DA, triggering large losses in SA assets in recent days.

READ | COALITION NATION | Like Mandela, Ramaphosa invites his political foes into the Cabinet

On Friday, the rand found some support in a weak dollar, which was hovering close to an eight-week low on Friday ahead of a crucial US jobs report that could provide clues on the timing of Federal Reserve interest rate cuts.

The euro held on to overnight gains after the European Central Bank reduced rates in a well-telegraphed move, but offered few hints about future easing as lingering inflation clouds the outlook.

The US dollar index, which tracks the currency against the euro and five other major rivals, was little changed at 104.09 as of 0453 GMT, not far from this week’s low of 103.99, the first time it had broken below 104 since April 9.

For the week, the index was on track for a 0.54% slide following a run of weaker macro data that put prompted investors to put two, quarter-point Fed rate cuts back on the table for this year.

That has seen traders positioned for a softer non-farm payrolls report later in the day, with the possibility that jobs growth comes in below the 185,000 median forecast of economists.

The Federal Open Market Committee is not expected to make any change at its policy meeting next week, but markets currently price in 50 basis points of cuts by end-December, with the first cut most likely coming in September.

“We expect the overall message from the non-farm payrolls report to be one of strength, albeit ebbing,” Joseph Capurso, head of international economics at Commonwealth Bank of Australia, wrote in a client note.

“We would not characterise the US labour market as weak – strong, rather than white hot, would be more accurate,” he added. “Consequently, market pricing for the FOMC’s first rate cut in September may be pushed out, supporting a modest increase in the US dollar.”