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Rand still enjoying Ramaphosa rally

Cape Town - The rand is still enjoying the so-called Ramaphosa rally, but may encounter some near-term weakness ahead of the Budget Speech on Wednesday, according to market analysts. 

The local currency was trading at R11.66 to the dollar on Monday at 11:00, after opening at R11.58 to the greenback. 

Last week it strengthened from just under R12/$ to an intraweek high of R11.56, on positive sentiment around the swearing in of South Africa's new president as well as relative dollar weakness. 

Bianca Botes, from corporate treasury management at Peregrine Treasury Solutions, said a small correction such as Monday’s decrease was to be expected “following a sharp movement driven by politics, especially where markets have priced in a lot of the upside prior to the event such as seen in this instance”.

Newly elected President Cyril Ramaphosa’s maiden State of the Nation (SONA) address, delivered on Friday evening, was well received, said Botes, particularly his emphasis on improving issues such as governance at state-owned enterprises.

Jameel Ahmad, global head of currency strategy and market research at FXTM, said the rand’s dip on Monday morning was linked to dollar strength.  

“This [the slight decrease] is likely linked to the dollar recovering some momentum, but the rand has also dipped lower against the G10 currencies, suggesting that investors are taking profit from positions. The rand could be subject to some near-term weakness ahead of the National Budget on Wednesday," he said.  

The finance minister is set to deliver the budget at 14:00 on Wednesday. Most analysts Fin24 spoke to said current Finance Minister Malusi Gigaba would likely deliver the speech, despite speculation that Ramaphosa could shake up the Cabinet before then. 

“Investors have now priced in the removal of Jacob Zuma as president, but will be looking for some indications that macroeconomic conditions are set to improve before pricing in further gains into the rand,” he said. 

Phillip Pearce, dealer at TreasuryONE, said sentiment would govern the rand’s movements on Monday, with no major data releases expected. 

He expects the local unit to trade in a range of between R11.55 and R11.72/$.

Pearce agreed that Ramaphosa’s SONA was well received.

“Many are expecting President Ramaphosa to begin a drastic clean of the house,” he said, adding that the new leader has already sidelined Minister of Mineral Resources Mosebenzi Zwane in directly talking with the Chamber of Mines about the Mining Charter. 

As a result, the chamber’s application for a judicial review and setting aside of the charter has been postponed by mutual agreement. 


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