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Biggest Slide: Rand Weakens After Cabinet Reshuffle

The rand headed for its biggest weekly slide since 2015, after the firing of Finance Minister Pravin Gordhan raised concerns about the country’s fiscal path and its investment-grade credit rating.

UPDATE: By 07:00, the rand had broken through to R13 to the dollar losing over 8% this week.

President Jacob Zuma is replacing Gordhan with Home Affairs Minister Malusi Gigaba, the Presidency said in a statement at midnight on Friday. ANC MP Sfiso Buthelezi will replace Gordhan’s deputy, Mcebisi Jonas.
The Rand has Taken a Huge Beating After Cabinet Reshuffle

The rand was one of the top three emerging-market currencies last year and early 2017, but politics are again casting a cloud over the nation’s assets. 

Gordhan had fended off a downgrade in South Africa’s rating to junk, and his commitment to curb spending and government debt had endeared him to investors. He clashed with Zuma over the affordability of building nuclear power plants and the management of state-owned companies.

“Market reaction to the cabinet reshuffle and what looks to have been a clean sweep of the Treasury top team is going to be a significant negative,” Razia Khan, chief Africa economist at Standard Chartered, said in an email. 

“Given past volatility in the rand when a cabinet reshuffle was even suggested, the expectation is that the impact may be more pronounced now.”

The rand is currently trading at R13.60/$, R14.37/€ and R16.80/£ respectively, leaving it heading for an 8% loss for the week - the worst such performance since the last time Zuma rocked markets with a finance-minister firing. 

Back in December 2015, it was Nhlanhla Nene’s ouster that hurt confidence - an episode that ended with Zuma bringing back the respected Gordhan to office. - Daily Sun

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