South Africa’s Rand Gains on Zuma Ouster Prospects, Debt Ratingsby
Three ministers reportedly asked president to step down
Country escaped ratings downgrades, S&P assessment due Dec. 2
The rand strengthened the most in almost a month, leading global gains against the dollar, after senior members of the ruling party called for South African President Jacob Zuma to step down and the country avoided a downgrade from two ratings companies.
The rand climbed as much as 2.8 percent and was 2.6 percent stronger at 13.7504 per dollar by 6:07 p.m. in Johannesburg, heading for the biggest gain since Oct. 31. The rand gained the most among 31 major and emerging-market currencies tracked by Bloomberg. Benchmark government rand bonds due December 2026 rose, driving the yield down by 21 basis points to 8.88 percent, the biggest decline in five months.
A move to oust Zuma, whose administration has been plagued by allegations of corruption and mismanagement, has significant support in the African National Congress’s National Executive Committee that’s meeting Monday, said a senior ANC official, who spoke on condition of anonymity. South Africa escaped a debt downgrade by Fitch Ratings Ltd. and Moody’s Investors Service on Nov. 25, while also boosting the currency. Emerging-market assets gained Monday as the dollar declined.
“Some in the market might be speculating about the potential for Zuma’s run as president to come to an end sooner rather than later,” said Jana van Deventer, an analyst at Johannesburg-based ETM Analytics. “We’re a bit skeptical about speculating too much on that outcome at this point in time, but the markets nevertheless seem to be riding that speculative wave.”
The rand gained 2.7 percent to 14.5560 per euro, a three-week high. It advanced 3.2 percent against the pound to 17.0547, strengthening the most since the Brexit referendum result was announced on June 24.
A negative outcome for South Africa from S&P Global Ratings, which like Fitch rates the country at the lowest investment grade and publishes its report on Dec. 2, could weigh on the currency, Van Deventer said.
“We are skeptical about how far this rand rally can run, especially since we still have S&P that needs to deliver their credit review for South Africa on Friday and they tend to be more strict when it comes to assessing a country’s underlying credit metrics,” she said.