Registered users can save articles to their personal articles list. Login here or sign up here

Rand hits 2-1/2-year high as ANC prepares to push out Zuma

Rand hits highest since June 2015.

The rand jumped more than 1% to its firmest since June 2015 and bonds hit a one-week best on Wednesday after the ruling African National Congress (ANC) said it would proceed with a vote to remove President Jacob Zuma from office.

At 1500 GMT the rand was 0.63% firmer 11.87, softer than the session-best of 11.79, with momentum hit by consumer inflation in the US posting their largest gains in a year.

“The strength in early trade was catalysed by dollar weakness. The politics also helped. The rand is definitely pricing-in the removal of Zuma but it is showing some signs of rotation as the saga carries on,” said analyst IG Group Shaun Murison.

The rand raced to the milestone just after the ANC’s parliamentary caucus said it would support a motion of no-confidence brought by an opposition party against Zuma due to be heard in the house on Thursday.

The party’s chief whip, Jackson Mthembu, said the ANC hoped to elect party leader Cyril Ramaphosa as president of the country on Thursday, after the no-confidence vote, or on Friday, accelerating the end of Zuma’s scandal-plagued reign.

“Whilst we see potential for a continued drop in the pair to 11.39 if it is all wrapped up this week, broadly speaking all of the good news is priced-in given the ZAR’s near 20% gain versus the dollar since Ramaphosa was voted as leader,” said emerging markets analyst at Informa Christopher Shiells.

After giving an interview with state TV, Zuma was expected to release a statement later on Wednesday.

The volatile trade saw cost of insurance on the rand rise sharply, with the price of one-week options increasing nearly 30%.

“The increase in the purchase of options, which could be calls or puts, should be seen as an increase in the uncertainty of direction. We can probably assume investors are buying puts,” said derivatives trader at Tradition Futures Gillian van Heerden.

Bonds also firmed, with the yield on the benchmark 2026 paper down 6 basis points at 8.395%.

On the equities market, stocks were a bit volatile as investors digested news coming from the ANC camp and Zuma’s nearly hour-long interview.

The Johannesburg All Share Index closed 0.33% higher to 57 399 points, while the Top 40 Index climbed 0.3% to 50 556 points.

South African miner Harmony Gold topped the gainers after reporting positive results on Tuesday. It closed up 10.51% to R23.34.

Gains were also supported by Morgan Stanley and Deutsche Bank hiking the miner’s price target. 

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.


To comment, you must be registered and logged in.


Don't have an account?
Sign up for FREE

End of comments.





Follow us:

Search Articles:Advanced Search
Click a Company: