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Here’s where the rand could go should Zuma step down

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Rand - [http://cdn.primedia.co.za/primedia-broadcasting/image/upload/c_fill,h_437,q_70,w_700/el1wuenwlstdw6xu2c26] Rand - [http://cdn.primedia.co.za/primedia-broadcasting/image/upload/c_fill,h_437,q_70,w_700/el1wuenwlstdw6xu2c26]

The rand eased in early trade on Tuesday, relinquishing some of the gains it notched up in a previous session on news that the ruling political party, the ANC was deciding whether to cut short president Jacob Zuma’s tenure as head of state.

According to a report by Reuters, the currency is expected to trade in the range of R12.00 to R12.25 on Wednesday, after it eased off its highs against the dollar during European trade on Monday.

The currency is tracking a wave of positive sentiment following the appointment of deputy president Cyril Ramaphosa, as ANC leader in December, while the ruling party’s top leadership has also decided that Zuma must leave office, with speculation about the timing.

Ramaphosa is expected to adopt more business-friendly policies, even though he enjoys the support of the communist party and the biggest labor union federation. His election as ANC leader helped boost the rand 10% last month.

At 09h55 on Tuesday, the rand softened against the dollar, but firmed against the pound and the euro.

  • Dollar/Rand: R12.09  0.33%
  • Pound/Rand: R16.90 -0.13%
  • Euro/Rand: R14.83 -1.43%

A report by The Guardian late on Monday reiterated that plans are in place to oust Zuma within the next two weeks, despite comments from secretary general Ace Magashule that NEC had not yet made a decision on the future of the current president.

Investec Bank economist Annabel Bishop said in a note at the start of the week that the rand could strengthen to as much as R11 to the dollar, should the president be forced to step down.

Further strengthening would also cause fuel price cuts and place downward pressure on inflation, with the possibility of the rand moving towards R10 to the dollar should Ramaphosa continue to make reforms and promote growth, she said.

Bloomberg market analyst Robert Brand also remained positive on the currency, stating that it was possible for Ramaphosa to continue the rally by continuing to clamp down on corrupt state-owned enterprises such as Eskom, and possibly even move away from some of the ANC’s more populist ideas (such as land reform) so as to encourage continued foreign investment.

 


 

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