Cape Town – The rand weakened to R12.55/$ early on Wednesday afternoon on rumours that President Jacob Zuma's removal would not be up for discussion at the first meeting of the ANC's new national executive committee (NEC).
According to an update from TreasuryOne, the rand declined on reports that newly-appointed ANC Secretary General Ace Magashule had said the agenda of the meeting would only include the ruling party's birthday celebrations in East London, and not Zuma's ouster
This, in addition to Tuesday's announcement by Zuma of an appointment of a commission of inquiry into state capture, was seen as bolstering Zuma's chances of staying on as President.
According to TreasuryOne, these two factors united to cause the rand to briefly spike to R12.55 to the greenback at around 12:45. It had pulled back to R12.49/$ by 13:15.
Market analysts warned earlier in the week that the rand would be sensitive to political rumours, as traders try to anticipate the political manoevres of the ruling party.
Market forecasts issued earlier on Wednesday had also indicated that analysts expect the rand's moves to be dominated by the outcomes of the NEC meeting, which is set to take place on Wednesday in East London.
The rand had opened at R12.34/$ on Wednesday morning, before initially weakening to R12.40/$. Musa Makoni, a trading specialist at EasyEquities, said this initial weakness was mostly driven by US dollar strength.
Makoni said was tough to predict which way the rand would swing, as there were a number of unknowns related to the NEC meeting. The rand could strengthen if Zuma left, but if the NEC made a decisions on land reform, it could also weaken, he told Fin24 by phone on Wednesday.
Zuma falls into the sea
On Tuesday the rand had already experienced an eventful day of trade, having briefly strengthened on the misinterpretation of reports that Zuma was leaving office.
The currency rallied by almost 13 cents to the US dollar at 12:40 on Tuesday, on reports that Elon Musk’s SpaceX mission, code named Zuma, was lost. This was mistaken as the SA president resigning, said TreasuryOne dealer Phillip Pearce.
Despite the confusion, the rand settled at the lower end of R12.30/$ by the end of the day.
Later on Tuesday Zuma announced that he would appoint a commission of inquiry into State Capture, based on the remedial action from former Public Protector Thuli Madonsela. This means Chief Justice Mogoeng Mogoeng will appoint the judge, indicating Zuma is losing power and has to meet the new NEC’s demands, explained Pearce.
“It’s hard to believe that President Zuma will just bow out and do what he has been ordered to do when he has been so astute in avoiding these issues and becoming the ‘Teflon Don’ in more than a decade," he noted.
Adam Phillips, treasury specialist at Umkhulu Consulting, said the outcomes of the NEC meeting would have a greater bearing on the rand than the SACCI Business Confidence index, which was also released on Wednesday.
The index was up 1.3 index points in December 2017 to 96.4. This was after it also showed an improvement in November 2017.
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