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Gordhan stand-off with Hawks rattles rand

Mar 16 2016 10:33

Johannesburg - The rand fell against the dollar on Wednesday as investors fretted over a stand-off between the Hawks and Finance Minister Pravin Gordhan.

A public spat between Gordhan and the Hawks police unit has triggered uncertainty and raised concerns of a repeat of the run on the rand and bonds in December when President Jacob Zuma inexplicably fired Gordhan's predecessor.

READ: Behind the Gordhan/Hawks battle

At 09:00 the rand was down 0.16% at R15.9550/$ compared with its close in New York. It was trading at R16.05 to the dollar at 10:30.

The currency slid as much as 3% on Tuesday after the Hawks threatened to exercise "constitutional powers" after Gordhan missed a second deadline to answer questions about a suspected spy unit established while he was head of the South African Revenue Service.

READ: Rand breaches R16/$

"While the current political wrangling continues to dominate headlines, uncertainty regarding the rand will remain entrenched," Nedbank said in a market note.

READ: Investors fear Gordhan could lose job amid Hawks spat

This week's sharp fall in the rand will make it harder for the Reserve Bank to decide its next move on interest rates on Thursday, as it weighs concerns about waning economic growth against those on rising inflation pressures.

Government bonds recouped some of the previous day's heavy losses, which pushed the yield on benchmark 2026 paper to a two-week high of 9.45%. In early Wednesday trade, the yield retreated 3 basis points to 9.42%.

Stocks opened flat, with the JSE's Top 40 index easing 0.13%.

Investors are also worried about a possible downgrade from Moody's, which said last week it would put South Africa's Baa2 rating on review for a cut. The agency was due to start an assessment visit on Wednesday.

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rand  |  markets  |  currencies



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