Investors are giving South Africa’s coalition government some leeway to get its finances in order, but the rising cost of hedging against rand declines shows pressure is building after last week’s disappointing budget update.

On October 30, when Finance Minister Enoch Godongwana presented his mid-term budget statement, an implied volatility measure for the dollar-rand exchange rate jumped the most since August, and it’s continued to rise over the past six days, reaching the highest level in six months. A similar gauge for emerging-market currencies has declined over the same period.

Risk reversals for the rand next year, part of a hedging strategy in which investors buy both call and put options on an asset, have also shifted further in favour of the dollar, with the trend beginning the day before the budget and continuing since. Risks are compounded by the US election on Tuesday, whose outcome is likely to inject more volatility into emerging-market currencies including South Africa’s.

“If the February budget shows further slippage, the market may well start to get nervous,” said Carmen Altenkirch, emerging-market sovereign analyst at Aviva Investors Global Services Ltd. “Presenting a realistic budget, and then sticking to it, is the way to keep the market on side.”

Investors focused on Godongwana’s estimate that the fiscal deficit will widen to 5% of gross domestic product for the year ending in March, an increase from the 4.5% projected in February and higher than most economists had anticipated. The ratio of dent to gross domestic product was also forecast to rise.

The October budget statement was the first under a coalition between the African National Congress (ANC), the Democratic Alliance and other parties. The power-sharing arrangement, known locally as the Government of National Unity, had generated optimism in markets, with some analysts saying structural changes that were previously considered unattainable under a long period of ANC majority rule were now possible.

Still, Fitch Ratings deemed even the updated debt targets “ambitious” and highlighted the twin threats of wage demands and healthcare spending that could disrupt the plan to cap national debt at 75.5% of GDP.

To be sure, Fitch said if the government could attain its latest fiscal targets and boost growth, that would be positive for the country’s credit rating, currently at BB-, or three levels below investment grade.

The latest budget policy statement was a reminder “of what underpins rating agencies’ misgivings,” namely “concerns with economic underperformance and structurally weak public finances,” said Tatonga Rusike, sub-Saharan Africa economist at Bank of America. February’s budget will need “to demonstrate a grip on spending,” he said.