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Rand treads water as violence threat hangs over SONA

Feb 09 2017 11:19

Cape Town - Any violence beyond mere scuffles between supporters of the Economic Freedom Fighters and the African National Congress ahead of and during President Jacob Zuma's State of the Nation Address (SONA) on Thursday will have a negative impact on the rand.

This is according to RMB currency strategist John Cairns.

The rand has been languishing at weak levels with little direction from offshore, but the centre of attention has now shifted to Zuma's SONA later on Thursday.

"All eyes are on SONA. Disruptions are a certainty, violence the risk, the speech itself likely bland," said Cairns in his morning note to clients.

He said the disruptions make for good TV viewing, but probably not for market movements.

"I would caution both importers and exporters on possible moves in the ZAR on the back of Zuma's speech," said Adam Phillips of Umkhulu Consulting.

"The EFF is sure to interrupt Zuma, but I suspect when he gets the chance to speak that his hands will be tied, unless he is going to use it to state that he will be calling it a day.

"This will be unlikely and expect the medium-term range of 13.20 to 13.60 to hold," he said, adding that the the gold price is providing a reason not to sell ZAR.

By 10:53 the rand was treading water at R13.43 to the greenback after opening at R13.41/$.

"USD/ZAR resistance is at 13.51. Immediate support is at 13.36, but the major support line remains at 13.20," Cairns said.

Zuma is expected to deliver his SONA at 19:00 on Thursday.

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