The rand slumped against the dollar after a tweet by US President Donald Trump on the country’s land debate fueled speculation of possible sanctions against the country.
The currency weakened as much as 1.7% after Trump said he
asked US Secretary of State Mike Pompeo “to closely study the South Africa land
and farm seizures and expropriations”. The South African government hit back,
tweeting that it “totally rejects this narrow perception which only seeks to
divide our nation.”
The US’s acting ambassador to the country will be summoned to explain Trump’s comments, two people familiar with the situation said Thursday. He was intervening in an ongoing debate about whether South Africa should implement a policy of seizing land without paying for it in a bid to address inequalities built up during apartheid.
The comment raised concern that the US could target South
Africa with economic sanctions having already moved against Turkey, a decision
that would weaken the rand further, according to Hironori Sannami, an
emerging-market currency trader at Mizuho Bank.
The rand was 1.3% weaker at 14.3466 per dollar by 08:23 in Johannesburg. Yields on benchmark 2026 government bonds rose 4 basis points to 8.97%.
On Wednesday, South African President Cyril Ramaphosa told Parliament that increasing access to land for the poor would happen in an orderly fashion and would initially focus on making state property available. The rand strengthened on his comments.
“One tweet does not make a book,” said Warrick Butler, a
currency trader at Standard Bank Group “There are far too many other components
affecting the rand. If the dollar reverses its recent correction then so too
will the rand regardless of Twitter.”
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