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The rand has strengthened to below R13/$ for the first time since President Jacob Zuma’s midnight Cabinet reshuffle on March 31 that saw former finance minister Pravin Gordhan and his deputy Mcebisi Jonas removed from their positions.
The local unit was trading at R12.99/$ at 07:44, tracking the firmer euro and as Deputy President Cyril Ramaphosa took on Zuma and the wealthy Gupta family, alleged to be capturing the state, in an apparent campaign speech.
“But, it was really the move in the EUR that caused the ZAR to strengthen,” said Adam Phillips of Umkhulu Consulting in his morning note to clients.
The euro strengthened to 1.09 to the greenback after French Centrist Emmanuel Macron won the first round of the presidential vote, taking the pressure off that far-right populist Marine Le Pen can win and move out of the European Union.
“At one stage we saw the EUR at 1.0940 in Asian trade, but it has come back to 1.0850. There could be a few rumbles ahead before the second round. This has caused the ZAR to touch 12.96,” said Phillips.
In a “dis-jointed week” with a public holiday on Thursday, little activity expected on Friday and Worker’s Day on Monday Phillips thinks the rand could continue to hide behind other emerging market currencies and react to a surprising move in the euro.
“Clearly no one has penciled in such a large move after the first round. The currency moves overnight hide that Ramaphosa has shown his hand… expect Cabinet meetings to be even more difficult now.”Source: Fin 24