The rand gained 0.5% against the dollar on Wednesday evening in the wake of President Cyril Ramaphosa’s announcement of his new Cabinet. Ramaphosa, speaking from the Union Buildings in Pretoria in a televised address, announced that Pravin Gordhan would stay on as minister of public enterprises. Tito Mboweni retained his position as minister of finance.
“There are no real surprises in the Cabinet,” said TreasuryONE in a snap note to clients. The local currency opened the day at R14.73/$ and fell by 1% in early trade before making up its earlier losses into the afternoon. By 20:50, minutes before Ramaphosa started to speak, it was at its opening price. At 22:22 it was changing hands at R14.66/$, up 0.5%.
In a note to clients, however, Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions, said the retention of Mboweni and Gordhan will likely appease markets and result in a positive perception of Cabinet. “These key appointments should contribute to political stability while ensuring the continuance of the pro-economic growth foundation set by the president and the two ministers, in particular, over the past year.”
However, Botes added, gains could be limited, as the national executive had “disappointed” by assigning Mabuza the role of deputy president, “indicating that President Ramaphosa had to compromise to appease the Zuma faction within the ANC”.
“The rand showed little reaction to the announcement of Cabinet, with the Deputy Presidency of David Mabuza having largely been priced in after his swearing in as an MP on Tuesday,” Botes said.
Analysts have warned that while the rand may strengthen in the wake of the Cabinet announcement, uncertainty around US-China trade talks and Brexit will likely still dampen demand for emerging market currencies.
“One can expect the ZAR to gain some ground in the local trading session tomorrow; however, any gains in the unit will be capped by the global backdrop,” Botes said.
Lukman Otunuga, a research analyst at FXTM, said earlier in the day that the local currency was facing a “tornado of different risks”.
“The rand does not like the headlines that David Mabuza is in the running to become deputy president,” said Otunuga.
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Source: Fin24
