South Africa's rand tumbles on 5-month low on cabinet anxiety, risk aversion

Published on Wednesday, 29 May 2019 09:56
Written by editor

South Africa’s rand tumbled to a five-month low against the dollar early on Wednesday, extending losses in the previous session as global risk aversion and uncertainty over cabinet appointments hurt sentiment.

At 0648 GMT, the rand traded at 14.8575 per dollar, 0.9% weaker than its New York close on Tuesday. The unit was trading at its weakest levels since January 3.

The rand fell more than 2% on Tuesday as deputy president David Mabuza was sworn in as a lawmaker after being cleared by the ruling African National Congress of bringing the party into disrepute. 

The move cleared the way for Mabuza, an important ally of Ramaphosa, to remain his deputy, but again threw a spotlight on corruption allegations that have hit the party’s popularity.

Investors are keen to see proof of President Cyril Ramaphosa’s clean governance pledge.

“The market requires evidence of strong leadership to quell fears of policy paralysis, which would require that members appointed to the executive are free of controversy,” RMB analyst Nema Ramkhelawan-Bhana wrote in a note. 

“The deadline in which to appoint a cabinet is fast-approaching and the onus lies firmly on the president to free the market of its anxiety to stem the tide of rand losses.”

Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.6%.

In fixed income, the yield on the benchmark government bond due in 2026 rose by 7.5 basis points to 8.52%.