BackRand leads major-currency drop as Zuma replaces finance minister
The rand snapped three days of gains, weakening 0.5% to 10.35 per dollar, the most among 16 major currencies
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South Africa’s rand led declines in major currencies a day after President Jacob Zuma replaced Pravin Gordhan as finance minister and appointed new ministers to portfolios including mining and energy.
The rand snapped three days of gains, weakening 0.5% to 10.3518 per dollar by 11:20am in Johannesburg, the most among 16 major currencies monitored by Bloomberg. Yields on government bonds due December 2026 climbed three basis points, or 0.03 percentage point, to 8.08%.
Zuma, 72, who took office for a second five-year term after the ruling African National Congress’ election win on 7 May, promoted Nhlanhla Nene, a deputy to Gordhan, who headed the ministry since 2009. He enlarged his cabinet to 35 members from 33 and created a ministry responsible for small-business development.
The cabinet is less business-friendly than the market expected, John Cairns, a foreign-currency strategist at Rand Merchant Bank in Johannesburg, said in a note to clients. Nene’s experience as deputy minister should reassure markets about policy continuity, RMB said.
Data tomorrow that may show South Africa’s economy contracted in the first quarter as a strike at platinum mines curbed production, weighing on the rand. Gross domestic product probably fell 0.2% in the three months through March, compared with growth of 3.8% the previous quarter, according to the median estimate of 19 economists in a Bloomberg survey.
Weaker growth is rand-negative because it reduces the likelihood of a central-bank rate increase and puts pressure on the current-account deficit, Bruce Donald, head of currency strategy at Standard Bank Group Ltd in Johannesburg, said in a note to clients. Bloomberg
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