Cape Town - The rand tanked by 19 cents on Monday, following a news story alleging that Finance Minister Pravin Gordhan and his senior leadership have been ordered to return from an overseas investor trip. The rand was trading at R12.50/$ at 11:14 on Monday after a high of R12.31/$ - a loss of 19 cents.
The Daily Maverick reported that Gordhan, Jonas and National Treasury director general Lungisa Fuzile, who were supposed to conduct the London leg of an international investor roadshow on Monday and Tuesday, were told to return to South Africa.
The Presidency has since confirmed that President Jacob Zuma has instructed Gordhan and Deputy Minister Mcebisi Jonas to cancel the international investment promotion roadshow to the United Kingdom and the United States and return to South Africa immediately.
This comes after the rand was trading at its strongest levels since June 2015, at one stage reaching R12.3146 to the dollar in morning trade on Monday. US President Donald Trump’s health care reform failure and strong Eurozone data saw the rand lead emerging markets to reach new highs as the US dollar weakened across the board.
Trump and the Republican party had aimed to repeal former president Barack Obama’s signature Affordable Health Care for America Act, known as ObamaCare. They were then going to enact the American Health Care Act, known as TrumpCare.
However, a faction within the Republican party refused to vote "yes" on the bill and so House Speaker Paul Ryan – who drove the bill – convinced Trump to pull it from being voted, a move that would have humiliated the White House and the Republicans.
Rand Merchant Bank analyst John Cairns said it was the euro/dollar currency that drove the currency markets, including the rand.
“The failure of the US health bill could have been seen as negative for all ‘Trumpflation’ trades, including the rand, but risk assets have not been overly concerned,” he said in a market note on Monday.
New speculation has emerged that President Jacob Zuma could recall Gordhan and his deputy Mcebisi Jonas, following reports that the Presidency contacted Gordhan and his delegation and instructed them to return home from an international roadshow.
The rand pierced R12.60/$ within minutes of the news of a Gordhan recall. At 11:36 the currency was stabilising at about R12.60, after hitting a high of R12.66.
Democratic Alliance spokesperson on finance
David Maynier said although the reports haven’t been confirmed yet, the
cancelled trip came at the worst possible time.
“Assuming it's true, this is prior to a high profile investor conference in the financial capital of the world (London),” Maynier said.
He added that reports that Zuma said the international investor roadshow was “unauthorised” are not credible, “as such trips are planned well in advance”.
A number of political analysts and economists have predicted that Zuma would reshuffle his cabinet in the second half of March. This follows the swearing in of former Eskom CEO Brian Molefe as a member of Parliament and the recent handing over of the chairmanship of the African Union by Nkosazana Dlamini-Zuma, freeing her up to serve in a cabinet position.
At 12:04 the rand was trading at R12.59 to the dollar.