Johannesburg - The rand slumped to a two-week low against the dollar and was the biggest loser among emerging market and major currencies after tensions between the Hawks, a special unit of the police, and Finance Minister Pravin Gordhan heated up.
Emerging market currencies weakened for a second day as sliding oil prices weighed on assets of commodity exporters and growing wagers the Federal Reserve will raise interest rates as soon as the next quarter dampened demand for risk. The rand tumbled 3.3 percent to R16.0248 to the dollar, by 4.48pm, the lowest since February. At 5pm, it was bid at R16.0138.
Read: Rand softer against the dollar
Gordhan yesterday hit out at a police unit investigating his role over setting up a surveillance unit at the revenue agency, saying its latest statement regarding the matter was threatening. The elite Hawks police unit said earlier it would exercise its “constitutional powers” after Gordhan missed a second deadline to answer questions about a suspected spy unit established while he was head of the SA Revenue Service.
“If it results in the removal of the finance minister it speaks to even further institutional erosion in South Africa,” Mohammed Nalla, the head of strategic research at Nedbank Group, said. “I don’t necessarily think it goes that far, that’s what international investors are absolutely terrified about.”
Read: Row between Gordhan, police intensifies
The rand could weaken to R18.50 to the dollar or even R20 should reassurances on fiscal management communicated by Gordhan during the February 24 Budget or in his meeting last week with investors in the UK and the US be compromised by political turmoil and lead to a credit rating downgrade, Nalla said.
“The rand is the weakest link so far this week, due to growing tension between Finance Minister Pravin Gordhan and his political opponents,” Piotr Matys, an emerging market currency strategist at Rabobank said. “It seems that the political atmosphere is increasingly toxic at a time when Gordhan is making attempts to restore confidence among foreign investors after it was completely shattered by the finance ministry debacle in December.”
BUSINESS REPORT