Recalcitrant Zuma shakes traders' conviction on rand's direction

But the premium of contracts to sell the rand over those to buy it in the next week - known as the 25-Delta risk reversal - climbed for a fifth straight day, reaching a level last seen before Ramaphosa clinched the ANC’s leadership battle.

• READ: ANALYSIS | Rand takes global & local volatility in its stride

Problem is, the party that put Zuma in office has no authority to fire him as president. It could instruct its members in Parliament to vote in favor of a motion of no confidence which, if carried, would remove Zuma and his cabinet. Or it could start impeachment proceedings, a process that may take much longer.

Either way, the government is running out of time to signal a new beginning for Africa’s most-industrialised economy: the crucial budget presentation is scheduled for February 21, and rating companies are waiting to pounce should it fail to deliver on Ramaphosa’s promises of fiscal responsibility and growth-stimulating measures.

And the longer it takes, the higher the risk of a reversal in the rand’s fortunes. The currency could weaken as much as 4% to R12.50 per dollar, from around R11.90/$ on Tuesday, as political instability increases, according to Saktiandi Supaat, the Singapore-based head of foreign-exchange at Malayan Banking BHD.

• READ: Defiant Zuma leaves SA in limbo

“This may get a bit messier,” warned Simon Quijano-Evans, a London-based emerging-markets strategist at Legal & General Investment Management.

The rand gained 0.33% to R11.90/$ by 13:51 in Johannesburg.

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