JOHANNESBURG - The rand strengthened more than 1% as markets increasingly priced in deputy president Cyril Ramaphosa’s victory in the neck-and-neck race for the ruling party’s presidency.
The local currency was bid at R14.54 against the US dollar at 5pm yesterday, against the R14.67 it was bid at by close of business on Monday.
The ANC provinces have now consolidated their nominations with Ramaposha having the most branch nominations as he heads to the elective conference later this month.
The rand's strength came despite the greenback's strength, which has drawn support on expectations that tax cuts for corporations and the wealthy would stimulate the US economy.
However, a potential US government shutdown looms on Friday if the US Congress cannot agree on a spending bill.
Allet Opperman, an analyst at TreasuryOne, said as the end of the year nears, economics had slipped into second place behind politics with markets paying more attention to US
President Donald Trump and the ANC conference than to data.
“With the current sentiment firmly with the Rand, we expect the Rand to be on the front foot, but gains can become more arduous as we head to the R13.30’s to dollar. Expect jittery trade leading up to next weeks ANC conference,” Opperman said.
The rand’s strength yesterday hurt the equities market, with gold mining and resources taking a bashing on the day.
The all share index shed 1.06% to 58 977 points, while the benchmark Top 40 index was 1.25% weaker at 52 413 points.
Leading the bloodbath on the local bourse were gold mining stocks, which bled 4.64%.
Sibanye Gold was down 6.42% to R16.75 on the day, while peers AngloGold Ashanti’s stock was 3.54% weaker to R129.80 and Harmony Gold shed 2.69% to R23.55.
The decline in resources was led by Glencore which lost 3.60% to R60.72, while BHP Billiton was 2.07% weaker to R244.60 and Exxaro was down 1.23% to R153.90.
Merchant West forex and money market trader, Tiffany Pollock, said that since the start of the succession race, markets have been favouring the business-friendly deputy president.
“With the party conference less than two weeks away, Jacob Zuma`s succession battle is enjoying close attention from market participants as they filter for clues on South Africa`s future policy trajectory and how the threat of a double-downgrade will be mitigated,” Pollock said.
The rand has traded resiliently post the announcement of the downgrade by S&P Global ratings late last month.
Further afield, the Pound rallied quite nicely on the back of positive Brexit discussions and it seems that the Brexit ship is finally being steered into a definite direction.
Annabel Bishop, the chief economist at Investec, said the up case for the market is perceived to be an ANC election outcome where Cyril Ramaphosa is elected president of the ANC.
“It is unlikely the market has fully priced in the different potential outcomes of December’s ANC elective conference, and there could be volatility in the rand should it disappoint,” Bishop said.