Rand Report: Rand Tumbles Amidst Ramaphosa’s “Farmgate” Scandal

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The South African Rand tumbled last week, with political uncertainty leading to a violent ZAR selloff. Allegations of corruption against President Cyril Ramaphosa sent the emerging-market Rand into the deep end, leading market participants away from the currency.

The president has been accused of abusing his position and breaking anti-corruption law, leading to speculation about his potential departure from power. Despite positive progress in the global economy, the ZAR was unable to dodge the impact of this political catalyst.

The South African Q3 unemployment rate was released last week. Unemployment came in at 32.9%, down from the 33.9% reading in the previous quarter. Despite an anticipated rise towards 33.5%, unemployment figures have declined to their lowest level since Q1 of 2021. Employment rose by 204, 000, while the number of unemployed persons declined by 269,000.

The South African balance of trade , which was released last week, declined sharply. A trade deficit of R4.3 billion was recorded in October. This comes after the reported trade surplus of R26.2 billion in the prior month. Exports fell by 17% and came in at R159.6 billion. Imports declined by a much softer 1.6% and were recorded at R163.9 billion.

For global data, Fed Chair, Jerome Powell, delivered his speech on Wednesday. This provided the market with additional insight into the Federal Reserve’s monetary policy outlook. Powell indicated that the Fed are looking to moderate the pace of future interest hikes, as economic activity returns to pre-pandemic conditions. With unemployment safely below 4%, and inflation on the decline, this seems reasonable.

Furthermore, the nonfarm payrolls (NFP) data was released on Friday. The NFP data indicated that 263,000 jobs were added in November. This exceeded the 200K forecast, shedding positive light onto the health of the US economy. Regardless of the positive reading, this was the lowest NFP recording since April 2021. This highlights the country’s labour market recovery, and further supports the case for a moderated rate trajectory.

As a result, the market sustained its risk-on investment sentiment. US equity markets were able to add to their recent gains, while the US Dollar encountered further headwinds. The Dollar Index (DXY) lost 1.33% of its value during last week. Additionally, the USD depreciated by 1.60% and 1.38% against the GBP and EUR respectively.

These global developments paved the way for the ZAR to gain in the forex markets. However, recent political uncertainty prevented the Rand from capitalising on market momentum.

The GBP/ZAR pair appreciated by 4.15% last week, from an open of R20.63. After reaching a high of R21.95, the pair closed at R21.51 on Friday. The EUR/ZAR pair made a similar move, climbing 3.98% higher. After opening at R17.73 on Monday and topping out at R18.85, the pair closed off at R18.45.

The USD/ZAR pair made a comparatively less pronounced move to the upside, rising by 2.56% during the week. After kicking the week off at R17.10 and hitting a high of R17.96, the pair ended the week at R17.51

Upcoming market events

Tuesday, 6 December

ZAR: GDP growth rate (Q3)

USD: Balance of trade (October)

Wednesday, 7 December

EUR: GDP growth rate estimate (Q3)

EUR: Employment change (Q3)

Thursday, 8 December

ZAR: Manufacturing production (October)

AUD: Balance of trade (October)

Friday, 9 December

USD: Producer price index (November)

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