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UPDATE 2-S.Africa's rand firmer as opposition to Zuma reshuffle grows; stocks slip
March 30, 2017 / 6:55 AM / 8 months ago

UPDATE 2-S.Africa's rand firmer as opposition to Zuma reshuffle grows; stocks slip

* Cenbank keeps rates on hold, warns of rand volatility

* Bourse investors on sidelines as politics weigh (Adds latest levels, analyst comments)

JOHANNESBURG, March 30 (Reuters) - South Africa’s rand firmed against the dollar on Thursday in volatile trade following a confirmation that President Jacob Zuma plans to fire Finance Minister Pravin Grodhan, while stocks were dragged lower by the fraught political environment.

At 1500 GMT, the rand traded at 12.8300 per dollar, 1.7 percent firmer from its New York close on Wednesday as the decision by the central bank keeping its benchmark repo rate unchanged at 7 percent on Thursday supported the currency.

The South African Reserve Bank warned that exchange rate had re-emerged as a risk to inflation due to the increase in political uncertainty over the past week, but added that it was at the end of a tightening cycle that began in early 2014.

“Today’s statement struck a comforting note of calm in the midst of the latest political turbulence. The SARB is working hard to assure the markets that the macroeconomic situation is – despite the headlines – slowly improving,” said analyst at Capital Economics John Ashbourne.

The rand was on the frontfoot for most of the day, and hit a session of high of 12.8200 after Reuters reported that Zuma is considering offering to step down next year at least 12 months before his term as South African president ends.

The currency had weakened more than 5 percent since Monday after Zuma ordered Gordhan to abandon an investor roadshow in Britain and return home “immediately”.

In fixed income, the yield on the benchmark instrument due in 2026 fell 20.5 basis points to 8.505 percent.

On the bourse, the benchmark Top-40 index fell 0.41 percent to 45,220 points while the All-Share index dropped 0.35 percent to 52,261 points.

Investors were cautious as political uncertainty over the fate of Gordhan continued to dampen appetite.

“A lot of participants are sitting on the side lines waiting for political developments to be more clear before continue investing,” said Cratos Capital equities trader Greg Davies.

The biggest faller on the bourse, Netcare plummeted 10.05 percent to 27.30 rand after it flagged headline earnings per share to be down between 9 and 13 percent. (Reporting by Olwethu Boso and Tanisha Heiberg; Editing by James Macharia)

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