CURRENCY
JunkStatus,
Zexit, Cyril & the Rand...
What now?
BY JAMES PAYNTER
I
sn’ t it uncanny how, time and again, when the news is about the worst it can get, that the Rand pulls a fast one against everyone’ s expectation? And then, just when everyone has started to get super Rand-confident on the back of positive events and news, the Rand suddenly weakens – contrary to rational logic.
Will anyone ever forget Gordhangate in March 2017? When Zuma decided it was time to throw all caution( and what was left of the country’ s international standing) to the wind, and pull out his big guns in the now infamous midnight Cabinet Reshuffle?
The Rand quickly jumped almost a full 100c to the Dollar
Image 1. Events vs the USD / ZAR since the start of 2017
in response. Of course, rating agencies were not slow in realising the implications of this self-serving action. The result? Inevitable downgrades by all three agencies.
What everyone was fearing since Nenegate( and what exex-Finance Minister Pravin Gordhan was doing his best to prevent) had now actually happened.
This was the end: the Rand was expected to run for the door!
And yet, against all expectations, it actually peaked 2 days later and, over the next few weeks, strengthened below pre-Cabinet Reshuffle levels.
Make any logical sense? I don’ t think so either. Just an anomaly, maybe?
Well, let’ s look at some more recent history.
Below is a weekly chart of the Rand for the past year, depicting some of the more notable events, including the‘ bad news’ April downgrades, and showing the subsequent strengthening over the next 2 months to pre-Cabinet Reshuffle levels.
An impressive recovery indeed. But that isn’ t nearly as impressive as Zuma’ s last desperate Cabinet Reshuffle in late October 2017- an attempt to push his Russia nuclear deal through. Once again, the Rand reacted. Over the next few weeks, it weakened to touch its worst level for the year, at 14.57.
This time, rating agencies took full notice of these actions. Standard &
56 APRIL / MAY 2018 SA Real Estate Investor Magazine