Day of drama sends rand up and down
THE rand opened at R11.92/$, and by around 11am gained 0.66% to trade at R11.85/$ on the back of the expectation that President Jacob Zuma was to vacate his office, but that didn’t take place.
However, as it became more likely through the day that Zuma would be forced out of office by today, the unit strengtheneto 2.5-year highs. By lunchtime, the currency was 1% stronger, touching R11.81/% but after a two hourlong speech by Zuma delivered in a tone of a person not willing to resign, the currency started back-peddling towards the R12/$ – losing some gains to clock in at R11.91/$ at around 4pm.
“The rand has not been inspired by the formal recall of Zuma. This highlights how much has already been priced in – surely now everyone expects the president to be out of office soon. John Cairns, RMB’s market strategist said.
“Nevertheless, after waiting for so long for such a major event, we still think that a formal resignation or removal will trigger some sharp gains, even if only temporarily,” he said.
Economist Azar Jammine said the rand’s strength remains vulnerable to challenges that Deputy President Cyril Ramaphosa faces and possible further mayhem on global financial markets.
“If Zuma does not leave office immediately, the currency need not weaken because of overseas perceptions that a Ramaphosa leadership will ensure a fight-back against corruption.
“More importantly, the new leadership is likely to encounter challenges in bringing about the structural changes needed to improve South Africa’s economic growth, including improved industrial relations, a vastly enhanced set of educational outcomes and effective managing of SOEs,” Jammine said.
• At 6pm yesterday the rand was at a 2.5-year high of R11.78/$.