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Rand cheers Mugabe ouster, still eyes rates, downgrade moves

Nov 21 2017 18:54

Cape Town - The rand dipped below R14/$ on the news that Robert Mugabe has resigned as president via a letter provided to the speaker of Zimbabwe's parliament.

"The rand reacted positively trading to 13.98 on the news as it's used as a proxy for our neighbouring country," said TreasuryOne currency dealer Wichard Cilliers.

The resignation comes amid political turmoil and an impending impeachment.

Fin24's correspondent in Harare Crecey Kuyedzwa reports that wild celebrations spontaneously broke out in parliament after the speaker suspended the impeachment debate.

Before the news, the local unit was bowing to the greenback, trading as low as R14.15/$, as investor anxiety heightened ahead of the rating’s review by S&P Global Ratings and Moody's this Friday.

FXTM Research AnalystLukman Otunuga said with political uncertainty at home and concerns over the nation’s economic outlook weighing on sentiment, speculations have mounted over a possible downgrade to South Africa's sovereign credit rating.

A touch of caution ahead of the pending inflation figures on Wednesday and interest rate direction on Thursday have also played a role in the rand’s weakness, said Otunuga.

"With sentiment towards the rand somewhat bearish amid the uncertainty, a credit downgrade has the ability to expose the currency to further downside risks."

Otunuga said the developing situation in Zimbabwe is not all good news.

"The Southern African Development Community is against recognising a party who seize control through a coup d’état. While the military are insisting it is not a coup, if it looks like a duck, swims like a duck and quacks like a duck, it is a duck.

"If the new guard is not legitimised it will impact future growth and make the economy extremely difficult to turn around. Zimbabwe is a significant African trading partner, and this may have a knock-on effect for South Africa."

By 18:42 the rand was traded 0.55% firmer at R13.97 to the US dollar from an overnight close of R14.04 and an intra-day low of R14.15.

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