Rand hits fresh two-and-a-half year high
South Africa’s rand hit a fresh two-and-a-half year high in early trade on Monday, extending a rally driven by optimism about the prospects for change under the new leader of the ruling African National Congress (ANC).
JOHANNESBURG - South Africa’s rand rose to its highest in more than two years on Monday amid growing expectations that scandal-tarnished President Jacob Zuma would soon be ousted, while emerging-market equities pushed to another near-decade high.
The rand gained around 1% against the dollar to trade at its best levels since June 2015, following reports that the ruling African National Congress (ANC) party plans to force Zuma to step down.
The rand has strengthened by about 12% since the election of businessman Cyril Ramaphosa as ANC leader in December, with investors warming to his promises to root out corruption and boost the economy.
“South Africa has a couple of things going for it which remind me of Brazil two years ago,” said Kiran Kowshik, a strategist at UniCredit. Those include improving external balances, a shrinking current account deficit, high real yields and hopes of reform under Ramaphosa, he said.
“The momentum behind the reform expectations is very strong and will continue to support the rand. I don’t think it’s a big deal if it goes to R11.70 per dollar. The support is there for the currency,” Kowshik said.
In another promising sign, Ramaphosa appointed a new board at state-owned power utility Eskom at the weekend. Eskom has been in a leadership crisis after several board members resigned in 2017 amid growing governance concerns.
South African bank stocks rallied hard, up 2% and the broader index rose 0.3%.
Shares of troubled South African retailer Steinhoff also jumped 10.6% after it announced a plan to sell $620 million of stock in investment firm PSG Group as it scrambles to plug a liquidity gap.