UPDATE: The rand has stabilised for the moment at around R12.94/$, still 20c weaker than its overnight close of R12.74. It reached a session high of R13.11 on rumours that President Jacob Zuma is set to fire Finance Minister Pravin Gordhan.
Cape Town - The rand, still reeling from President Jacob Zuma's order that Finance Minister Pravin Gordhan return immediately to South Africa from an international investor roadshow, received another blow on Tuesday as rumours surfaced that Zuma told senior leaders of the South African Communist Party that he plans to fire Gordhan.
The rand weakened to R13.11 to the greenback after Bloomberg quoted three sources, saying Gordhan is facing Zuma's axe.
By 08:51 the unit was trading at R13.02/$ from an overnight close of R12.74 in New York.
No reason was given for Gordhan's recall on Monday, but a government source said the Presidency had not given permission for the trip, a reason Treasury dispelled.
"The rumour mill is spinning around this morning regarding the future of the Finance Minister. This is creating a lot of noise in the market. Rand is not reacting well to this uncertainty and is currently trading at R13.00 against the US dollar and R14.10 against the Euro," TreasuryOne said in a brief note.
Adam Phillips of Umkhulu Consulting said in his morning note to clients if the recall episode "had not happened yesterday, we could have been looking at the ZAR in the 12.20s, as the USD is definitely on the back foot overnight".
"I am sure we are all bewildered! The day [Monday] started very brightly with the ZAR trading just below 12.31 on the back of Trump's failure to get his healthcare bill to a voting stage. Within a couple of hours the ZAR was on its own after Gordhan was told to come back from a non-deal investor roadshow," he said.
Gordhan is expected to be in South Africa on Tuesday, in time for his court battle with 14 Gupta-owned companies over the closure of their bank accounts.
Gordhan's recall renewed fears of a Cabinet reshuffle, but also stoked rumours that the move may be linked to the court case involving the Guptas and banks. The case will be heard from March 28 to 30 in the North Gauteng High Court.
"The whole saga is an embarrassment to us all and once again the rating agencies will be looking very carefully at the situation. It has allowed exporters to sell in stages and some might have been able to sell GBP above 16.05 and EUR above 13.90," said Phillips.
He said it remains to be seen if any announcements come out locally, "but it seems that our president has some tricks up his sleeve that will mean individuals, companies, rating agencies, offshore investors and even the SARB will have to digest".
"Operators are very worried that [former Eskom CEO and now MP Brian] Molefe is getting ready to take the finance ministry seat.
"If that happens... how far the rand goes depends on what changes are made in Cabinet. There was a rumour going around that nine Cabinet ministers could be asked to leave. All I ask is that we are put out of our misery in a saga that has been now going on for nearly 18 months."
Business executives and union leaders had accompanied Gordhan to London to speak to potential investors as South Africa faces an investment downgrade to junk status amid weak economic growth and heightened political tensions.
The ongoing battle between Zuma and Gordhan led to fraud charges being brought against Gordhan and then dropped last year, prompting accusations of a political “witch-hunt”. This rattled the financial markets, as did rumours before last month’s Budget Speech that he might be moved from the Treasury, according to NKC Africa Economics.
"This move by Zuma is now reviving talk of a Cabinet reshuffle, unnerving investors who see Gordhan as an emblem of stability. Some pundits say Gordhan is the target of political pressure from a faction allied to Zuma, which has criticised his plans to rein in government spending as the economy stagnates."