Zuma factor gives rand a bad month
The rand has weakened to a onemonth low against the dollar, erasing an earlier gain, as a statement of support by President Jacob Zuma failed to allay investor concerns that Finance Minister Pravin Gordhan may be replaced.
The rand fell 0.6% to 14.2527 per dollar just hours after Zuma’s failed reassurance on Thursday and bringing its decline in the past four days to 5.3 percent. It was trading at 14.0596 at 3.17pm yesterday.
The yield on rand-denominated bonds due in December 2026 climbed two basis points to 9.06%, set for the highest close in a month.
The presidency said it wouldn’t stop an investigation by a special police unit into allegations that Gordhan oversaw the establishment of an illicit investigative unit during his tenure as head of the national tax agency, even as Zuma expressed “full confidence” in the finance minister.
“The country remains on a knife edge,” said Warrick Butler, head of emerging-market spot trading at Standard Bank. “As we all know too well these days, the country’s leadership decisions can be unpredictable.”
The rand’s one-month implied volatility against the dollar, based on prices of options to buy and sell the currency, remained above 20%, the highest among emerging-market currencies, indicating that traders still see risks ahead. – Bloomberg