The rand extended its losses against the dollar on Monday afternoon‚ as the market processed reports that President Jacob Zuma was gearing up to make an announcement of a R40-billion plan to fund free higher education.
The ability of the government to keep spending under control is being closely watched‚ as South Africa heads towards possible further downgrades by ratings agencies.
Markets were also faced with the news of the resignation of the Treasury’s long-time budget head‚ Michael Sachs‚ reportedly due to interference from Zuma’s office over the budgeting process.
The ANC was expected to hold a briefing after a national executive committee meeting on Tuesday‚ while Zuma was set to be interviewed on ANN7 at around 8pm on Monday.
The probability of either an explosive announcement from the ANC‚ or clarity on the higher education plan‚ were low‚ said Rand Merchant Bank currency strategist John Cairns. As such‚ uncertainty was expected to continue.
Analysts said emerging markets were expected to be under slight pressure this week‚ amid a decline in appetite for risk-assets following uncertainties over tax reform in the United States.
The rand also failed to capitalise on sterling weakness‚ with the latter under pressure over increased uncertainty of the future of United Kingdom Prime Minister Theresa May.
Reports at the weekend suggested at least 40 British Conservative Party MPs were willing to sign a letter of no confidence in May‚ and while short of the required 48‚ this had created “much frustration among investors seeking clarity on Brexit negotiations”‚ said FXTM chief market strategist Hussein Sayed.
At 3pm‚ the rand was at R14.5432 to the dollar from R14.3603‚ at R16.9496 to the euro from R16.7505‚ and at R19.0482 to the pound from R18.8881.
The euro was at $1.1655 from $1.1659.
by Karl Gernetzky – TimesLIVE