Rand Steadies Over Zexit Talks But Could Reach Highs If He Resigns

Analysts expect that the rand could strengthen slightly if Zuma goes today.
A television presenter speaks in front of a reception with an electronic board displaying movements in major indices at the Johannesburg Stock Exchange building in Sandton Johannesburg, March 14, 2016. REUTERS/Siphiwe Sibeko
A television presenter speaks in front of a reception with an electronic board displaying movements in major indices at the Johannesburg Stock Exchange building in Sandton Johannesburg, March 14, 2016. REUTERS/Siphiwe Sibeko
Siphiwe Sibeko / Reuters

The rand could reach a high of R11.70 to the US dollar if President Jacob Zuma resigns on Tuesday, Fin24 reported. The rand rallied on Monday amid rumours that Zuma had resigned as president, and stayed steady on Tuesday following reports that the ANC had told Zuma to resign.

The rand reportedly stayed around R11.90 to the US dollar for most of Monday, and strengthened almost 1 percent to R11.88 by 16:30 on Monday. The rand closed on R11.94 to the dollar.

It reportedly weakened slightly around 3.28am after reports that Zuma had to be told to resign, and traded firmer at R11.93 by 06:23, according to Fin24.

But while the rand will likely strengthen when Zuma goes, analysts say this will not be significant.

"This is because every bit of information, including expectations, fears, perceptions and doubts, are all factored into the market price at any point in time. I believe most people have already factored in his [Zuma's] resignation, and his departure may have some short-term reaction, but may not have as big an impact as people would have thought," Alex Paynter of Dynamic Outcomes told Fin24.

According to IOL, the rand lost some of its gains after the Presidency denied reports that Zuma had resigned on Monday. As the NEC meeting entered its fifth hour, the rand traded R16.50 to the British pound.

On Monday afternoon, Eyewitness News (EWN) reported that analysts believed investors were hoping for the best.

Economist Thabi Leoka told EWN: "It's quite clear that the market is in support of Cyril Ramaphosa removing President Jacob Zuma. That's why you're not getting the volatility and jitteriness from these talks."

Chief economist at Econometrix, Azar Jammine, reportedly said the economy faced many more challenges than just Zuma's exit, and said there was a lot of confidence in a new leadership's ability to take steps towards fixing it.

Bonds gained on reports of Zuma's resignation, reported MoneyWeb, while the risk premium on the rand increased, implying some volatility.

Derivative specialist Gillian Van Heerden told MoneyWeb: "Looking at the JSE's mark-to-market data, we're seeing a number of puts ... and if one has puts listed it's usually someone buying puts so it seems the market's expecting the currency to strengthen."

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