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The state capture report is released and the rand soars. Is this coincidence?

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After an eventful day of news developments surrounding the release of the State of Capture Report, the rand did some interesting turns against the dollar yesterday.

It had opened to a high of R13.60 against the dollar, and by 1.30pm, immediately after it was announced that the state capture report had to be released before 5pm, the rand had strengthened to R13.31. By the end of the day, the rand had closed to R13.52 against the dollar.

The graph below demonstrates the fluctuations according to foreign exchange solutions site www.xe.com, the world’s trusted currency authority.

Rand Strengthens: The currency graph shows how the rand had strengthened to a high of R13.31 against the dollar yesterday, immediately after it was announced that the state capture report has to be released. Image: WWW.XE.COM; XE CURRENCY CHARTS

Azar Jammine, chief economist of Econometrix, said that with the recent developments of the South African political environment, which include the withdrawal of the fraud charges against Finance Minister Pravin Gordhan and the release of the report on state capture, it has reinforced the power of South Africa’s judiciary.

“The implication of the latest judicial developments has been to reinforce the power of South Africa’s judiciary and more generally its institutions. It has also diminished chances of a so-called “capture” of the national treasury and the public purse by forces closely connected to President Zuma who has been seen to be eyeing control of treasury as a means of gaining access to lucrative deals with public corporations and institutions,” he said.

The strengthening of the rand yesterday may have been as a result of the political developments, but Jammine has pointed out that the strengthening rand has also been attributed to US factors.

“While most of the attention seems to be focused on the effects of domestic political developments on the rand, sight may have been lost of the fact that part of the appreciation of the rand/dollar exchange rate in the past few days has been global in nature,” he said. Jammine gave reasons such as the increased probability of Donald Trump winning the US presidential election.

“The dollar has depreciated from $1.08 to the Euro a fortnight ago, to $1.11 most recently,” he said.

Jammine has cautioned South Africans against unwarranted optimism regarding South Africa avoiding a credit rating downgrade and its currency maintaining the recent strength however.

“The possibility of the departure of Zuma and confidence in South Africa’s institutions is not going to nullify the structural impediments preventing South Africa’s economic growth rate from rising to more attractive levels necessary to prevent the rising trend of unemployment from continuing,” he said.


Avantika Seeth
Multimedia journalist
City Press
p:+27 11 713 9001
w:www.citypress.co.za  e: avantika.seeth@citypress.co.za
      
 
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