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Johannesburg - The rand started regaining previously lost ground on Monday ahead of National Prosecuting Authority (NPA) head Shaun Abrahams' scheduled press conference.
On October 11, Abrahams announced that Finance Minister Pravin Gordhan was ordered to appear before court on November 2 on a charge related to the early retirement of former deputy commissioner Ivan Pillay.
But Abrahams' decision has been criticised by legal experts, and City Press on Sunday reported that he may consider dropping fraud charges against Gordhan.
When the markets opened on Monday morning the rand was trading at R13.81, close to levels recorded on October 10 before the NPA announced plans to charge Gordhan.
The currency strengthened further in later trade, and by 10:45 the local unit was 10c firmer at R13.73 from Friday's New York close of R13.83.
"When the markets opened on Monday morning, the rand showed signs that it was firming up," said independent trader Petri Redelinghuys and founder of Herenya Capital Advisors.
According to John Cairns of RMB Global Markets, the rand's outperformance will continue only if the NPA drops charges against the finance minister.
"The rand has continued to strongly outperform, actually gaining on Friday even as risk assets came under pressure after the FBI revived its investigation into Clinton’s email use.
"Further gains, however, will be difficult as the dollar has bounced this morning and the USD/ZAR is not showing any signs of being able to break the 13.70/74 support line."
Cairns said the one thing that could get the rand to rally again would be if charges against the finance minister were dropped.
The NPA says it is looking at the issue and that no decision has been made as yet, but speculation is rife that an announcement will be made that charges have been dropped at Monday's press conference.
"This would certainly be rand positive – even though the rand’s risk premium is actually lower than where it was before the summons was issued, and even lower actually than before Nenegate.
"If charges are not dropped, then the minister’s court case will begin on Wednesday. As we have said before, this would get huge attention but would not move the markets: the court appearance would only be a formality; the actual trial starting one year from now at the earliest, and the court is extremely unlikely to throw out the case."
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