The Rand enjoyed broad stability for most of last week and in fact gained on all of the G10 currencies leading up to the ANC elective conference over the weekend. The Ramaphosa result helped it kick on from Monday.
The rally was aided in part by a weaker US Dollar, although it advanced far further than other emerging market currencies. There has since been a bit of a pull back, but this bit of good news is something South Africans at home and abroad should enjoy.
This week started with the appointment of Cyril Ramaphosa as the new ANC president, positioning himself as the champion against corruption and state capture. By the time the Ramaphosa win was officially announced, the ZAR went into “sell the news” mode with USD-ZAR getting scooped off its March 12.54 level.
The rand has pulled off a terrific comeback this week, follow Cyril Ramaphosa’s election to the Presidency of the ANC.
It nonetheless added nearly another 3% dip from Friday’s move, so clearly the market was still on the right side of the eventual tight outcome. The bulk of the easy gains have now been achieved. From current levels, selling USDs no longer looks as an obvious trade in the way that it did a month ago.
For further ZAR gains to be possible, a Zuma recall needs to be on the cards. After yesterday’s result, that is not immediately possible, however, the potential for legal action to be brought against Zuma will leave investors hopeful that he may still be made an example of.
His demise, should it occur, would likely be treated as a firm ZAR positive, but for
that we may need to wait until February.
From an economic data perspective, this week is largely quiet and the Rand is likely to trade according to the “whim of year-end thin flows and political headlines”.