Cyril Ramaphosa's land shock unravels rand recovery, currency plunges 16c in an hour
The rand had been headed for a break below R13/$ before the announcement
The rand extended losses on Wednesday morning, following an overnight rout after the ANC’s surprise decision to seek to change the Constitution to expropriate land without compensation.
“It is with uncanny ability that SA’s politicians deal the beleaguered economy yet another blow just when it appeared as though things were settling down,” said Wichard Cilliers, head of dealing & director at TreasuryOne.
The rand had been on a steady recovery, touching a two-month high of R13.08/$ early on Tuesday, before tumbling to lows of R13.39/$ early on Wednesday morning, in a decline that began late at night after the news broke.
The South African currency plunged from just over R13.11/$ shortly before 9pm, to roughly R13.27/$ by 10pm — weakening by 16c within the space of an hour.
The ANC made the decision at a two-day lekgotla held in Irene, outside Pretoria. The party is set to make a submission to this effect at the parliamentary hearings on land that are under way.
At 8.21am, the rand had made a small rebound from its low point, to trade at R13.3576 to the dollar, but still weaker than R13.2693 at the US close, at about 11pm SA time. It was at R15.6008 to the euro from R15.5141 at the US close, and at R17.5023 to the pound from R17.4160.
“Whilst the market was shaping up for a break below the R13/$ handle, this news has dealt the rand a blow and in all likelihood the news will not be well received,” Cilliers said.
“This latest move is once again believed to be politically motivated ahead of the national elections next year and is aimed at neutering the political stance of the EFF,” Cilliers said.
“Dollar/rand responded immediately to the news and there is a high probability that it will likely weaken further. If communicated poorly, this holds the potential of turning into a game-changer depending on how seriously foreigners view this threat to property rights more generally.”