Pound South African Rand Exchange Rates Sheds Gains Wednesday afternoon on Possible Review
The Pound South African Rand exchange rate surprisingly gave up its Wednesday gains and even some of its Tuesday gains on Wednesday afternoon, as some investors piled back into the Rand on hopes that South Africa’s finance minister would get his fraud charges reviewed. Reuters reported;
‘South Africa’s rand firmed more than 2 percent on Wednesday after the state prosecutor said Finance Minister Pravin Gordhan could ask for a review of a decision to charge him with fraud.’
As noted, this Rand rally is due to a possibility of a charge review. If prosecutors decide to push ahead with the fraud charges after all, the Rand could easily shed any of the quick recovery it made on Wednesday afternoon.
As a result, GBP ZAR is currently considerably volatile, and this volatility will continue so long as questions over Gordhan’s future as finance minister as well as Brexit jitters continue.
(Published 10:46 BST 12/10/2016)
The Pound South African Rand exchange rate has soared since Tuesday’s session despite considerable weakness in the Pound throughout the week, as fraud charges against South Africa’s finance minister continues to shock markets. GBP ZAR has gained over 40 cents in value since markets opened for the week, hitting a new weekly high of 17.73.
Pound (GBP) Kept Afloat on Brexit Debate Hopes
After a sudden plummet in value on Tuesday night, the Pound was finally given a little support by Wednesday morning due to an announcement from UK Prime Minister Theresa May.
May had previously denied MPs a vote on Article 50 timing or Brexit negotiations. However, she stated on Wednesday morning that the government needed to be transparent on Brexit plans and stated that a debate on negotiations in UK Parliament would be allowed.
It is possible that these debates will not actually change the government’s plans to aim for a ‘hard Brexit’, which is why Sterling’s movement was still mixed on Wednesday despite rising from its lows.
Rand Undermined; ZAR Plummets on Finance Minister Fraud Charge
Tuesday’s session saw news that shocked markets after it was revealed South Africa’s finance minister, Pravin Gordhan, is set to be charged with fraud by South African prosecutors.
The finance minister is respected by markets and concerns that he may lose his job have severely undermined the Rand’s value this week. Analysts have also grown increasingly concerned over the nation’s ruling party, the African National Congress, as well as the future of Africa’s most developed economy.
The Rand continued to plunge on the news on Wednesday morning, falling to its lowest levels in a month against most currencies. However, GBP ZAR only gained to its highest levels in a week due to low demand for Sterling.
Pound South African Rand Forecast: What’s Next for the Rand?
Sterling investors are likely to continue with the same GBP movement in the coming days and weeks, prioritising Brexit news and keeping the Pound pressured on ‘hard Brexit’ concerns.
In comparison, the future of South Africa’s Finance Minister is a much bigger unknown. Analysts predict that this will be the primary cause of Rand pressure in the coming weeks, as Gordhan is summoned to court on charges he believes are politically motivated.
Analysts speculate this is due to clashes over control of the national treasury between Gordhan and South Africa’s President Jacob Zuma. There have been tensions between Zuma and Gordhan before, as the finance minister attempts to reign in government spending in order to keep public finances under control.
Despite high concern towards the Rand, the currency had previously been one of the better-performing emerging market currencies this year. Analysts at Nedbank Group Ltd. believe the Rand will remain above January’s record low against the US Dollar.
At the time of writing, the Pound South African Dollar exchange rate 17.73, while the Rand Pound exchange rate traded at around 0.056.
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