Gordhan’s sacking on the horizon?
Monday this week saw President Jacob Zuma order Finance Minister Pravin Gordhan to cancel all meetings organised as part of an international investment roadshow to the UK and US. Whilst the Government did not give an official reason for its decision, one source claims the presidency had not given permission for the trip to go ahead. This has sparked fresh rumours of a possible cabinet reshuffle to be on the cards in the near future, casting fears amongst investors over the possibility of a fourth person being appointed to the post of Finance Minister in the past year alone.
Gordhan, who has now held the post twice under President Zuma’s tenure is well respected by the international investment community and is accredited as the reason the rand was one of the best performing currencies of 2016. GBP/ZAR rates have plummeted from their January 16 highs of 24.54 to the current 16.35 rates, costing you more than 1.2m Rand on a £150,000 trade in the process.
How did the news affect the Rand?
The Rand has been forced to surrender the hard fought and gradual gains it has made since the beginning of March. The currency lost 6% against GBP on Monday, from 15.45 to 16.37 making a 2m Rand purchase more than £7,200 cheaper.
If Pravin Gordhan were to be fired from the position I could see GBP/ZAR rates soar back up past the 20.0 level as the news is priced in across the currency market. If you have a ZAR selling requirement it may be wise to lock in the current rates of exchange (GBP/ZAR currently close to 3 year high levels) for a small deposit, through the use of a forward contract. Contact your account broker here at Foreign Currency Direct to learn more about the wide variety of strategies and options available to you.
Economic data releases
The South African Reserve Bank (SARB) comes together tomorrow at 13:00pm for its latest interest rate decision. Global head of emerging market currency strategy at Brown Brothers Harriman, Win Thin expects the central bank to keep benchmark interest rates on hold at 7%.
For more information on how political events could drive ZAR exchange rates, please call us on 01494 725 353.
