US rates, Pravin Gorhan, US dollar

US rates a cause for concern as Gordhan’s fate remains a mystery

While ANC secretary general Gwede Mantashe’s address regarding Finance Minister Pravin Gordhan’s battle with the Hawks pushed the rand down 10 cents on Tuesday, it was the US rate hike threat that caused further concern over the currency.

US rates, Pravin Gorhan, US dollar

“The rate threat is feeding into the rand mainly via the stronger dollar,” said RMB analyst John Cairns on Wednesday.

The rand was trading marginally lower at R14.46/$ at 09:00 on Wednesday.

“The markets are starting to take the threat of a Fed hike seriously,” he said. “Fed talk certainly seems to be preparing us for higher rates. And data from the last few days has also played along: while there are still no signs of accelerating inflation, consumer confidence, and spending remains strong.

“December seems the most obvious time for the Fed to act. But September is not out of the picture,” he said.

Regarding Mantashe’s address, the market decided to move the rand up another 10c on the back of it, Umkhulu Consulting analyst Adam Phillips said on Wednesday.

Mantashe said officials who are charged should step down from their roles.
He was clearly referring to Gordhan’s refusal last week to report to the Hawks’ office in Pretoria to sign a warning statement for his involvement in the so-called rogue unit established when he was a commissioner at the South African Revenue Service. Gordhan has repeatedly stated that he had done nothing wrong. It is believed that signing a warning statement is a precursor for arrest.

He also stated at an ANC press briefing on the public spats between Gordhan and the Hawks, Eskom, and Treasury, and allegations of corruption involving the ANC and rail agency Prasa, that ministers should cooperate with police and answer questions by the Hawks if summoned.

“Spreads are very wide on the rand and this is understandable considering what is going on,” said Phillips. “Speculation will drive it in the short term until the circus of news stops.

“Given the dollar rise since last Friday, we can only really at look at clawing back to R14/$ if things go back to normal, while I don’t really want to speculate where we could go on the upside.”

Cairns said Mantashe’s statement was carefully worded to avoid taking sides, saying that it has confidence in Gordhan and that the uncertainty was damaging, but that Gordhan must answer to the Hawks.

“The public enterprise minister took a stronger stance – demanding that Eskom must immediately release the report required by Treasury – but this is a small firefight in the bigger war.”

Eskom complied hours later.