Rand weakens past R14.60/$ as cabinet uncertainty takes its toll
The delay of President Cyril Ramaphosa’s cabinet announcement and issues at Eskom are weighing on the local currency on Tuesday morning
The rand fell to its worst level in more than a month on Tuesday morning, amid uncertainty over President Cyril Ramaphosa’s new cabinet.
The make-up of new cabinet is in focus, amid speculation of intense lobbying behind the scenes, and anxiety over possible internal divisions within the executive.
There are reports that ANC deputy president David Mabuza may serve in that position within the government and is expected to be sworn-in as an MP later in the day. Last week, he requested a delay of his swearing-in to clear allegations against him.
The rand is reacting negatively to this uncertainty, said TreasuryOne senior currency dealer Andre Botha, with uncertainty at Eskom also playing its part.
The size and composition of Ramaphosa’s cabinet is seen as a key issue for markets, as it could determine the pace and extent of promised anti-corruption efforts, and pro-growth economic reforms.
Eskom CEO Phakamani Hadebe resigned on Friday and the future of the embattled power monopoly, as well as the extent to which it will require state financial support, are still open questions.
At 10.38am the rand was 1.21% weaker at R14.6021/$, 1.16% softer at R16.3383/€ and 1.02% weaker at R18.4845/£. The euro was flat at R1.119.
The benchmark R186 government bond had weakened, with its yield rising 5.5% basis points to 8.45%. Bond prices move inversely to bond yields.
There are no significant local economic releases on Tuesday, and focus is expected to remain on political headlines. These will be cabinet-related locally, while global focus remains on the US-China trade war.
Although some international economic confidence measures will be watched, investors are likely to watch US President Donald Trump’s twitter feed for any shift in risk sentiment, said Rand Merchant Bank analysts Nema Ramkhelawan-Bhana and Elena Ilkova in a note.