Traders invested in the rand haven’t been this nervous since the global financial crisis.
According to a report by Bloomberg the nerves are based around the ANC’s national conference and the decision to elect a replacement for President Jacob Zuma on Sunday.
Should current deputy-president Cyril Ramaphosa win, the rand is expected to rally to below R13 per dollar – a level last seen in September, said Bloomberg citing Rand Merchant Bank.
In comparison, victory for his main opponent – Nkosazana Dlamini-Zuma – could see the currency test the record-weak levels it posted last year.
“Traders should brace for ‘explosive’ moves after the weekend,” said John Cairns, a currency strategist at RMB.
“The rand’s strength in recent weeks – it has gained 7.3% against the dollar in the past month – suggests investors are pricing in a Ramaphosa victory. That may leave the currency vulnerable to a selloff should Dlamini-Zuma win.”
“We suspect that the rand’s gains are going to abate and the market will be cautious going into the weekend given the decisive vote is due on Sunday,” Cairns wrote. “But this does not imply stability; in fact, the opposite as nerves get drawn tight,” he said.
Feedback from investors suggests the rand could gain as much as 3.6% on a Ramaphosa win, but slump as much as 15% on a Dlamini-Zuma triumph, Cairns said.
The rand opened at R13.49 to the dollar on Thursday morning.