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The South African rand could surge if president Jacob Zuma is ousted by a motion of no confidence in the nation\u2019s parliament, though gains would falter if Zuma survives the vote, analysts say.<\/p>\n
The currency was the best performer among 31 major peers Monday after National Assembly Speaker Baleka Mbete said the parliament would vote by secret ballot Tuesday. The news boosted overnight volatility in the rand to the highest since early May on a closing basis.<\/p>\n
Here\u2019s what analysts and investors had to say about the currency\u2019s prospects ahead of the ballot:<\/p>\n
While the private vote is seen as more likely to oust Zuma than would be the case with a public ballot, he will probably get through it because \u201che\u2019s survived so many scandals already,\u201d said Win Thin, head of emerging-market currency strategy at Brown Brothers Harriman\u201cIf the vote fails, then fade\u201d the gains, Thin said.<\/p>\n
\u201cBut if it passes, ZAR is off to the races.\u201d Zuma has staying power, and \u201cthat is negative for the ZAR,\u201d said Cristian Maggio, head of emerging-market strategy at TD Securities in London.<\/p>\n
If the motion fails, he sees USD\/ZAR targeting 13.63; if it passes, he predicts the ZAR will strengthen to 13 or beyond While the president will likely stay in power, the chances of Zuma\u2019s ouster have \u201cincreased significantly\u201d with the secret ballot \u201cIf the motion is approved, then USD\/ZAR will tank.<\/p>\n
“The market would cheer any result that sees Zuma\u2019s term end prematurely, as this has been marred by a number of scandals and bad economic performance\u201d<\/p>\n
The president is \u201cvery unlikely to be voted out,\u201d said Kieran Curtis, a money manager in London at Standard Life Investments.<\/p>\n
\u201cIt\u2019s so unlikely that a party would vote against its own leadership in parliament\u201d If Zuma loses the vote, \u201cthe rand would immediately strengthen\u201d past R13\u00a0 per dollar Curtis is “pretty neutral\u201d on rand assets, which are performing well at the moment.<\/p>\n
He\u2019s concerned about potential ratings actions toward the end of the year and their possible effect on investor flows \u201cThe rand will crash through 13,\u201d if the no-confidence vote passes, said Kevin Daly, a portfolio manager at Aberdeen Asset Management If Zuma stays in power, the rand will soften slightly \u201cThere\u2019s more upside that can come out of here, because Zuma being forced to resign is not priced”.<\/p>\n
“Most people expect him to survive this vote. A lot of the bad news is already priced in\u201d. If leadership changes in December, the rand could strengthen, he said USD\/ZAR is approaching the 61.8% Fibonacci support of last week\u2019s range at R13.17; its next significant support is at R13.16-R14.<\/p>\n
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