Recalcitrant Zuma shakes traders’ conviction on rand’s direction

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But the premium of contracts to sell the rand over those to buy it in
the next week – known as the 25-Delta risk reversal – climbed for a
fifth straight day, reaching a level last seen before Ramaphosa clinched
the ANC’s leadership battle.

Problem is, the party that put Zuma in office has no authority to
fire him as president. It could instruct its members in Parliament to
vote in favor of a motion of no confidence which, if carried, would
remove Zuma and his cabinet. Or it could start impeachment proceedings, a
process that may take much longer.

Either way, the government is running out of time to signal a new
beginning for Africa’s most-industrialised economy: the crucial budget
presentation is scheduled for February 21, and rating companies are waiting
to pounce should it fail to deliver on Ramaphosa’s promises of fiscal
responsibility and growth-stimulating measures.

And the longer it takes, the higher the risk of a reversal in the
rand’s fortunes. The currency could weaken as much as 4% to R12.50
per dollar, from around R11.90/$ on Tuesday, as political instability
increases, according to

Saktiandi Supaat, the Singapore-based head of foreign-exchange at
Malayan Banking BHD.

“This may get a bit messier,” warned

Simon Quijano-Evans, a London-based emerging-markets strategist at Legal & General Investment Management.

The rand gained 0.33% to R11.90/$ by 13:51 in Johannesburg.

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