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Rand thrives following dropping of charges against Pravin Gordhan

The rand extended its gains against the dollar into the afternoon‚ reaching an intraday best level of R13.51 in reaction to the National Prosecuting Authority’s withdrawing its charges against Finance Minister Pravin Gordhan.

The gains were expected as speculation mounted that the fraud charges against the minister and his co-accused would be dropped.

At 3.31pm‚ the rand was at R13.5548 to the dollar from Friday’s R13.8143. It was at R14.8417 to the euro from R15.1759‚ and R16.4808 to the pound from R16.8334.

The euro was at $1.0949‚ from $1.0986.

Investec economist Annabel Bishop said the uptick in the rand from the middle of last week had suggested that the charges would be dropped.

“Essentially‚ markets were relieved that Pravin Gordhan remained in position to deliver [the medium-term budget policy statement]‚” said Bishop.

TreasuryOne currency dealer Andre Botha said the rand was rising to the levels it traded at before “the whole Pravin Gordhan saga began”.

“On the whole‚ the economy can breathe a sigh of relief‚” as the consumer had more certainty about inflation‚ and this would boost business confidence.

He said financial markets could become more stable as the threat of a rating downgrade had eased “somewhat”.

Last week‚ the CEOs of 80 leading South African companies signed a pledge to mobilise support for Gordhan and to try avert a credit rating downgrade‚ which they fear would have ruinous consequences for the economy.

Included in the group were the JSE’s Nicky Newton-King and Barclays Africa’s Maria Ramos‚ while Business Leadership SA’s Thero Setiloane made his on behalf of member companies.

“We are not out of the woods by any stretch of the imagination‚ as the credit rating review is still coming up‚” warned Botha.

Bishop said that although there was a possibility SA’s hard currency long-term sovereign rating from S& P Global Ratings’ would remain unchanged at BBB when announced on December 2‚ there remained “a risk of a downgrade due to the negative outlook”.

She said Fitch could downgrade its outlook on SA’s local currency rating (BBB) to negative at the end of this year‚ and potentially the foreign currency rating (BBB) [as well].”

 

 

— TMG Digital/BusinessLIVE

 

 

 

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