Zuma's reshuffle, higher CPI knock rand | Fin24
 
  • SAA

    The flag carrier has vowed to re-accommodate passengers after it cancelled flights to save cash.

  • Poverty Cycle

    South Africans are struggling to escape poverty due to low levels of social mobility, says the WEF.

  • Slowdown

    The International Monetary Fund has revised SA's growth outlook for 2020 down to just 0.8%.

Loading...

Zuma's reshuffle, higher CPI knock rand

Oct 18 2017 18:04
Jan Cronje

Cape Town - The rand lost over 1% of its value against the dollar on Wednesday, as international investors reacted to the news of President Jacob Zuma’s surprise Cabinet changes, according to TreasuryOne dealer Wichard Cilliers.

The rand fell from R13.39 to R13.60 against the dollar, before strengthening somewhat. At 17:27 the local unit was trading at 13.58 to the greenback. 

The rand lost 0.5% on Tuesday immediately after Zuma's announcement. 

“The movement we have seen today is still in reaction to the reshuffle yesterday, as investors are worried about SA,” Cilliers told Fin24 via WhatsApp on Wednesday afternoon. 

Cilliers said two additional factors have impacted the local currency. 
 
First there is the mini budget due to be delivered by Finance Minister Malusi Gigaba next week. “The market is unsure how Malusi Gigaba will make the budget work,” said Cilliers. 

A second factor was that Consumer Price Index data, released by StatsSA on Wednesday, came in at 5.1% for September from 4.8% in August 2017.

Cilliers said the rise in CPI meant SA “won’t see interest rates being cut to help our growth”.

Global view 

Gerrit van Rooyen, an economist at NKC African Economics, said on Wednesday afternoon that the rand’s weakness should be seen against the backdrop of weaker emerging market currencies in general. 

This, he said, was due in part to US Treasury bonds yield climbing higher, which suggested an increase in expectations of future US interest rates and lower capital inflows into emerging markets.

“The rise in US bond yields was driven by speculation that Stanford University economics professor John Taylor is now the frontrunner to replace Janet Yellen as the head of the US central bank early next year. Markets expect that US interest rate would be higher if Taylor takes over,” he said. 

But even when compared only to other emerging market currencies, the rand’s performance was still bad. 

“That has to do with the latest Cabinet reshuffle, which has reignited fears about the impact of political instability on the South African economy and credit rating,” he said, adding - like Cilliers - that CPI data also played a role. 

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

jacob zuma  |  rand  |  exchange rate  |  sa economy  |  dollar
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Voting Booth

How concerned are you about ransomware attacks?

Previous results · Suggest a vote

Loading...