South Africa’s rand strengthened more than 4% in early trade on Monday, extending overnight gains after President Jacob Zuma named Pravin Gordhan as the new finance minister.
Zuma late on Sunday restored a widely respected Gordhan to the ministry in a dramatic U-turn that gave Africa’s most advanced economy its third finance minister in a week.
By 08h10, the rand had strengthened 4.66% against the dollar to 15.1495, recouping some losses suffered last week following the sacking on Nhlanhla Nene in the ministry.
Zuma had immediately replaced Nene with a relatively unknown lawmaker, David can Rooyen, sparking a wave of critisim and financial turmoil.
The currency fell more than 6% over two days last week following the removal of Nene, a civil servant veteran who was keen to rein in government spending.
Gordhan’s appointment on Sunday helped the rand recover most of its losses and set it up for its biggest daily percentage gain since 2008.
But some analysts said events of the past few days have permanately damaged investor confidence in the leadership of the economy whose investment grade status is already at risk.
“Markets should rally back very strongly but I would not expect a total retracement with a permanent loss of trust in leadership even if we are in a better place,” said Peter Attard Montalto of Nomura in London.
The removal of Nene also led to a selling frenzy in South African banking stocks, which dropped nearly 20% on investor worries that the country’s credit rating would slip into “junk” status.
Zuma said the about-face decision was prompted by many calls to rethink his decision.
“On the 9th of December 2015, I announced the appointment of a new Minister of Finance, Mr David van Rooyen,” Sunday’s statement from the presidency said.
“I have received many representations to reconsider my decision. As a democratic government, we emphasise the importance of listening to the people and to respond to their views.”