Johannesburg - The rand fell as much as 2 percent against the dollar as concern intensified around the role of South African Finance Minister Pravin Gordhan, who broke his silence over reports that he may be arrested and dismissed.
The rand was 1.9 percent lower at 15.8398 by 10.48am in Johannesburg, the weakest since March 15 on a closing basis and the worst performance among 24 emerging-markets currencies tracked by Bloomberg. Yields on benchmark government rand-denominated bonds climbed 10 basis points to 9.48 percent, the highest since January 28 on a closing basis.
Gordhan may be charged with espionage and fired following a police investigation of his alleged involvement in a special investigations agency within the national revenue service, the Johannesburg-based Sunday Times reported.
In a statement late on Tuesday, Gordhan said the reports were “extremely distressing” and that he “would never have thought that individuals within the very agencies of this government would now conspire to intimidate and harass” him and his family.
The minister didn’t “hide his disappointment at the manner in which he was being hounded by his comrades or tone down his concerns over the nefarious agendas at play and the risks to South Africa’s democracy and financial wellbeing inherent in these plans”, Gary van Staden, an analyst at NKC Independent Economists in Paarl, said in a note. “The gloves now appear to be off in the shadowy war” between Gordhan and his detractors in the ruling African National Congress, he said.
The MSCI Emerging Markets Currency Index fell 0.4 percent as the dollar strengthened on prospects for a US interest-rate increase. The rand’s one-week implied volatility rose to the highest since December 15 and the most among its developing nation peers.
Read: SA's inflation slows in April
South African inflation slowed for a second consecutive month in April, Statistics South Africa said Wednesday, leaving room for the central bank to pause its policy tightening cycle. The bank announces its latest decision on interest rates on Thursday.
The resurfacing of political tensions comes two weeks before S&P Global Ratings is due to publish its assessment of South Africa’s BBB- credit rating. A Bloomberg survey this month showed 12 of 13 economists expect S&P to cut South Africa to non-investment grade by year-end.
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