JOHANNESBURG – ANALYSTS have forecasted the Rand to react “strongly” to the election of a new leader of the ruling African National Congress (ANC), most likely late on Monday.
Nkosazana Dlamini Zuma and Cyril Ramaphosa are vying for the top job to replace incumbent President Jacob Zuma.
Voting was ongoing at the time of press, having only started on Sunday night after some delays.
Nedbank Group’s Economic Unit pointed out the rand continued on its strengthening trend, due to hopes that Ramaphosa, a candidate perceived to be more business friendly, could win the ANC leadership race.
“The race is a tight and acrimonious one, the outcome will have a big impact on the future of both the ruling party and the country,” Nedbank stated on Monday.
The bank noted the local unit ended last week at R13,22, R15,55 and R17,60 against the US dollar, Euro and British pound respectively.
This was from R13,66, R16,06 and R18,27 at the previous week’s close. Zaakirah Ismail, Standard Bank South Africa Fixed Income Strategist, and Elna Moolman, the bank’s head of Financial Markets and Research Economics, concurred the Rand gained momentum on Friday (reaching a three-month high against the dollar) as the odds appeared to increasingly tilt towards a victory for Ramaphosa.
This was especially after some court rulings against some of the regions/branches that had nominated Dlamini-Zuma as their preferred candidate.
“The rand is expected to react strongly to the outcome, but the plausible reactions have become asymmetric insofar as a Ramaphosa win is at least partly discounted,” the Standard Bank pair stated on Monday.
John Cairns, the Rand Merchant Bank Currency Strategist, said the weekend trade gave some idea of the potential market reaction.
He projected based on this reaction, it appeared the market could trade down to and even temporarily below the key resistance level of 12,74 in a “market friendly outcome.”
“There remains less clarity on how trade would reflect the opposite outcome but 14,50 still appears to be the natural target,” Cairns said.
– CAJ News