Zuma has real power over the rand - currency strategist

Cape Town - If President Jacob Zuma puts truth to the rumour to replace the minister of finance or his deputy, the rand could pop up to R15 to the dollar, according to RMB currency strategist John Cairns.

Cairns said ongoing talk of a Cabinet reshuffle has kept the rand nervous and under pressure.

"USD/ZAR would be trading around the 13.30 mark if it was not for the political noise," he said in his morning note to clients.

By 11:00 the rand was trading 0.24% weaker at R13.53 against the greenback from its overnight close of R13.50. It touched R13.69 on Monday.

He said the market would be able to handle minor Cabinet changes with only mild losses, but any change that affects Treasury would be another story.

The rand reacted strongly on Friday after news that Zuma may fire ministers who backed calls for him to step down last year and defied his instructions.

READ: Zuma may fire disobedient ministers to tighten grip on power

Bloomberg, citing senior ANC leaders, reported that Zuma told the party’s National Executive Committee (NEC) last week that he’s considering the action and said the government needs to improve its performance.

Cairns said there has been no confirmation of the rumours or even further reports on this matter, and no mention was made during the formal post-NEC briefing.

The rumours escalated with weekend reports that Nkosazana Dlamini-Zuma is on her way back to the country, and amid speculation that former Eskom CEO Brian Molefe could take up a role in Parliament soon, a necessary step to becoming a minister.

"As such, the coming weeks would be a good time for a reshuffle but this does not mean it is certain or, more importantly, that the president will take the major step of changing a Treasury post," said Cairns.

ANC secretary general Gwede Mantashe stopped short of rubbishing reports of Molefe's deployment to Parliament.

At a media conference on Monday following the ANC’s lekgotla over the weekend, Mantashe went to great lengths to explain how MPs are deployed to Parliament. 

“You don’t just wake up and put Brian Molefe on the parliamentary list. It doesn’t work that way,” Mantashe said at the press briefing.

"One cannot prove a negative – i.e. that the reshuffle is not going to happen," said Cairns.

"If the rand is going to retrace the losses, it will be through the story slowly fading from attention. What works against this view is that the timing of a reshuffle is still two weeks away. Until then nerves will remain elevated."

Also, Cairns said, the Gordhan-Gupta saga is keeping politics centre of mind.

Meanwhile, the offshore environment offers a neutral to mildly negative environment for the rand, Cains said, mentioning the ongoing fears over US President Donald Trump's action and policy decisions in Japan, the US and the UK.

"So far this year, a lot of our attention has been on Presidents Trump and Zuma. We expect the rest of 2017 to be more of the same. President Trump will probably get far more mentions but as our report of today makes clear, President Zuma has the power to send the rand running."

Adam Phillips of Umkhulu Consulting said the gold price may have helped the rand a little on Monday, but this help may not be there today.

"The ZAR is sticking out like a sore thumb at the moment and not really trading in line with majors.

"The usual local fighting involving the ANC, Zuma, [Finance Minister Pravin] Gordhan and the Guptas was around yesterday, with Mantashe asking S&P not to get involved in internal politics."

Phillips is expecting a tight range on the ZAR/USD of 13.48 to 13.55, after a fairly volatile session in the last 24 hours. 

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