Fear, beer batter rand

30 September 2016 - 08:55 By Bloomberg, Reuters

The rand tumbled for a second day yesterday, leading declines against the dollar among major and emerging currencies, amid speculation inflows arising from Anheuser-Busch InBev 's purchase of SABMiller may have run their course. The rand slumped 1.4% to R13.8087/$1 in Johannesburg, heading for the biggest drop since September 9 and paring its gain this month to 4.3%.Universities have been shut down amid protests over fees, while local lobby groups representing companies have expressed concern that President Jacob Zuma hasn't done enough to allay concerns that Finance Minister Pravin Gordhan is still being targeted by some state agencies, undermining efforts to rein in spending and stamp out corruption.Even so, the currency strengthened in recent weeks as foreign investors seeking high-yielding assets bought the nation's stocks and bonds, and amid speculation AB Inbev was buying rands to pay local shareholders for its $104-billion (about R1.3-trillion) acquisition of SABMiller."If you have a look at how the rand's performed through the course of the past six to eight weeks, it's done reasonably well given all the political developments," George Glynos, chief economist at ETM Analytics, said."It speaks to a carry-trade contingent that has been fairly significant," he said, referring to traders who borrow currencies of countries with low interest rates to buy high-yielding assets."That contingent without the backstop of AB Inbev inflows to support their trade in the month ahead is potentially unwinding."The slow reform of South Africa's state-owned firms and the upheaval swirling around the finance minister pose risks to the country's credit rating, a Standard & Poor's executive said yesterday."We have said before that we take comfort from the targets set by the National Treasury. But the pressures [around Gordhan] are certainly of concern," said S&P's managing director for sub-Saharan Africa, Konrad Reuss, in Johannesburg...

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