The rand was weaker on Tuesday afternoon as it emerged that President Jacob Zuma had told senior leaders of the South African Communist Party (SACP) that he planned to fire Finance Minister Pravin Gordhan.
When the market learnt on Monday that Zuma had recalled Gordhan and his deputy, Mcebisi Jonas, from an investor trip to the UK and US, the rand nosedived from 20-month highs it scaled last week.
The president is reported to have told senior leaders of the South African Communist Party that he plans to dismiss the finance minister.
After hitting a fresh 20-month best level of R12.31 against the dollar in Monday’s opening trade‚ the rand plunged more than 3%, or 52c, to an intraday worst level of R12.8295/$ in the afternoon.
The rand also weakened against global majors and went from being the best-performing emerging-market currency to one of the worst-performing currencies.
Rand Merchant Bank (RMB) analyst John Cairns said further runs on the rand were possible but Monday’s rand losses were nothing compared with what happened in the worst-case Cabinet reshuffle scenario when former finance minister Nhlanhla Nene was replaced in 2015. At that time, the rand shed 150c immediately and 250c within a month.
Cairns said the best rand scenario for the day was for the rand to stabilise above R12.50/$ within a 30-cent range, the worst case scenario would be a Cabinet reshuffle.
At 11.30am the rand was at R12.9766 to the dollar from a previous close of R12.7616. It was at R14.0954 to the euro from R13.8647 and at R16.3203 to the pound from R16.0221.
The euro was at $1.0859 from $1.0864.
By Reitumetse Pitso for www.businessday.co.za