USD/ZAR could edge higher – Danske Bank
|Pernille Henneberg, Senior Analyst at Danske Bank, noted the recent events around the South African Rand.
Key Quotes
“In emerging markets, the South African rand has taken a heavy beating overnight, weakening 5% against the USD, after President Jacob Zuma fired Finance Minister Pravin Gordhan and eight other cabinet members in an attempt to arrest flagging support for his government and presidency”.
“The new Finance Minister is the Home Affairs Minister Malusi Gigaba, who, according to Bloomberg, does not have financial or business experience. The firing of Gordhan, who is well respected by the investor community and rating agencies for his prudent fiscal policymaking, is certainly negative for the outlook of the rand”.
“The move brings into question fiscal sustainability and, therefore, significantly increases the risk that South Africa will be downgraded to junk. With the events overnight, the USD/ZAR may move close to our current end-March target of 14.4 and may even move higher depending on the policy signals from the new cabinet and notably the Finance Minister”.
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