The Zuma Effect – Rand goes from best to worst-performing currency in the world

Until a week ago, the rand was the world’s best-performing currency, according to Bloomberg.

When President Jacob Zuma announced a reshuffle of his cabinet, replacing the minister and deputy ministers of finance, all of the gains made since the start of 2017 were obliterated.

Bloomberg said that before 27 March, the rand had appreciated 11% this year.

After Zuma’s recall of Pravin Gordhan and Mcebisi Jonas, the rand showed the sharpest decline among the 140 currencies Bloomberg monitors.

It also led to ratings downgrades from agencies S&P and Fitch, both pointing to the major cabinet reshuffle as a key reason for their decisions.

S&P downgraded South Africa’s sovereign debt rating to BB+, its first “junk” tier. Local currency debt was downgraded to BBB-, one notch above junk. Both ratings carry a negative outlook.

Fitch downgraded South Africa’s long and short-term foreign and local currency Issuer Default Ratings to its first junk tiers, with a stable outlook.

Economists have warned that Moody’s will follow suit and that the impact of junk status would lead to escalating costs and lower growth – which may lead to further downgrades.

Rand-USD performance after Zuma-Gordhan reshuffle

Now read: Welcome to the Junk Banana Republic

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The Zuma Effect – Rand goes from best to worst-performing currency in the world