Rand weakens in response to Busisiwe Mkhwebane's findings

The rand dropped against the dollar on Friday on speculation that public protector Busisiwe Mkhwebane’s adverse finding against President Cyril Ramaphosa will derail his reform agenda.

The currency, which had been supported by the Reserve Bank’s decision on Thursday not to cut interest rates aggressively, fell to as low as R13.95/$, after reaching the day’s best level of R13.81.

Mkhwebane found that President Cyril Ramaphosa “deliberately” misled parliament about a R500,000 campaign donation from corruption-implicated company Bosasa. The report threatens Ramaphosa’s pre-election promise to implement structural reforms aimed at boosting  the economy.

“The markets are worried that anything that upsets a potential reform agenda is seen as growth negative. Clearly this report produces more uncertainty as it threatens someone who is perceived as bringing about growth-boosting structural reforms,” Nedbank chief economist Dennis Dykes said.

At 2.30pm the rand had weakened 0.78% to R13.9466/$, 0.29% to R15.6530/€ and 0.54% to R17.4589/£. The euro had weakened 0.48% to $1.1223.

The benchmark government 10-year bond was stronger, with its yield falling five basis points, or 0.05 percentage points, to 7.975%. Bonds yields move inversely to bond prices.

Gold was down 0.64% to $1,436.80/oz while platinum had gained 0.79% to $856.12. Brent crude added 0.22% to $62.64 a barrel.

The rand firmed on Thursday after the Reserve Bank trimmed the repo rate by 25 basis points to 6.5%, amid growing expectation that the US Federal Reserve will cut rates at the next Fed meeting at the end of July.

Markets have partially priced in a 50 basis points cut for the next meeting after New York Federal Reserve CEO John Williams said central banks should “act quickly” to avoid economic distress. The New York Fed refuted assumptions that Williams’s comments were referring to potential policy actions by the Fed, CNBC reported.

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