Rand Posts Worst Week Since May as Gordhan Doubts Persist

South African Rand Set for Worst Week Since Feb.
  • Bonds heading for biggest weekly decline since December
  • President Zuma says can’t stop probe of Finance Minister

South Africa’s rand had its biggest weekly drop since May and benchmark government debt slumped he most this year on concern Finance Minster Pravin Gordhan’s job is on the line amid speculation of a deepening rift between him and President Jacob Zuma.

Statements of support for the finance minister from Zuma and Deputy President Cyril Ramaphosa on Thursday failed to ease anxiety, with a survey of investors and other market participants by Rand Merchant Bank showing about half say he will be removed. The currency pared losses on Friday after Federal Reserve Chair Janet Yellen said U.S. rate increases will be gradual.

“The fight is on,” John Cairns, a currency strategist at Johannesburg-based Rand Merchant Bank, the investment-banking unit of FirstRand Ltd., said in an e-mailed note. “Political heavyweights, including the deputy president, have come out in support of Gordhan, but the Hawks and their supporters might still take the plunge. The rand would bomb if he goes. It still appears to us that not enough risk is priced.”

The currency strengthened 1.1 percent 14.0522 per dollar by 5 p.m. in Johannesburg, paring the week’s decline to 3.9 percent, the most since the five days ending May 6 and the biggest drop among more than 150 global currencies tracked by Bloomberg.

Opposition parties and some independent analysts have accused Zuma, 74, of trying to gain greater control of the National Treasury to further his economic interests before his second and final presidential term ends in 2019. He has denied the allegation.

‘Full Confidence’

Gordhan was summoned to report to the Hawks police unit on Thursday. He refused to go, saying he had done nothing wrong. Zuma said that while he had “full confidence” in the finance minister, he could not stop the investigation into alleged irregularities at the South African Revenue Service, which Gordhan led from 1999 to 2009.

Benchmark government rand-denominated bonds due December 2026 gained for the first time in three days, with the yield down 10 basis points to 8.97 percent. The yield has soared 50 basis points this week, the most since December, when Zuma fired then-Finance Minister Nhlanhla Nene and replaced him with a little-known lawmaker. He reappointed Gordhan five days later as markets took a nosedive.

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