South Africa's rand took another tumble on Tuesday with investors reeling from President Jacob Zuma's sudden decision to recall his finance minister from a trip abroad in a sign of escalating tensions.
The rand lost more than 2 percent to 13.0968 against the dollar during morning trade, having dropped 2.4 percent on Monday in its steepest daily loss since the sell-off sparked by the U.S. election in November.
Yields in dollar-denominated sovereign debt and local government benchmark bonds jumped, while the cost of insuring government debt against default also rose.
The losses came after Zuma ordered Pravin Gordhan, trusted as a steady hand by investors, to return back to South Africa from an investor roadshow in London, triggering speculation he could lose his job in an imminent cabinet reshuffle.
"The ongoing dispute between President Zuma and Finance Minister Gordhan over the control of public finances and state-owned companies may have reached its final stage," Piotr Maty, emerging market FX strategist at Rabobank wrote in a note to clients, adding the rand could weaken to 14 to the dollar or significantly more.
"Gordhan's departure would increase the risk that the required structural reforms will not be implemented and the commitment to maintain spending in check may weaken, which could lead to ratings agencies downgrading South Africa to junk."
Currencies and emerging market assets elsewhere fared mixed thanks to rising commodity prices but also faced by a steadier dollar as anxiety over Donald Trump's setback on healthcare reforms that had rattled global markets in recent days waned.
China's yuan weakened 0.2 percent and mainland stocks fell 0.4 percent on further signs of tightening liquidity after the Chinese central bank refrained from injecting short term funds into the banking system for the third straight session.
Russia's rouble eased 0.1 percent after the central bank chief said there were grounds to increase lending in the country and vowed that cleaning up Russia's banking system was a priority.
However, MSCI's emerging market benchmark equity index gained 0.3 percent, reversing Monday's losses.
Hungary is expected to hold interest rates at its record low of 0.9 percent when policy makers announce their decision later in the day, though the limit on funds commercial banks can hold in 3-months deposits is expected to be lowered.
For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
on year
Morgan Stanley Emrg Mkt Indx 968.75 +3.04 +0.31 +12.35
Czech Rep 985.81 +6.36 +0.65 +6.97
Poland 2212.33 +10.45 +0.47 +13.57
Hungary 32155.33 +279.11 +0.88 +0.48
Romania 7963.81 +2.79 +0.04 +12.40
Greece 656.76 +10.19 +1.58 +2.04
Russia 1116.88 +2.22 +0.20 -3.08
South Africa 44979.07 +318.17 +0.71 +2.45
Turkey 90121.76 +426.70 +0.48 +15.34
China 3252.99 -13.96 -0.43 +4.81
India 29402.87 +165.72 +0.57 +10.43
Currencies Latest Prev Local Local
close currency currency
% change % change
in 2017
Czech Rep 27.02 27.02 -0.00 -0.04
Poland 4.25 4.24 -0.19 +3.58
Hungary 309.35 308.73 -0.20 -0.17
Romania 4.55 4.55 +0.03 -0.30
Serbia 123.86 123.85 -0.01 -0.41
Russia 56.98 56.88 -0.18 +7.52
Kazakhstan 314.85 315.56 +0.23 +5.97
Ukraine 27.12 27.11 -0.04 -0.44
South Africa 12.89 12.75 -1.13 +6.52
Kenya 102.85 102.70 -0.15 -0.47
Israel 3.61 3.61 -0.07 +6.59
Turkey 3.61 3.62 +0.04 -2.42
China 6.88 6.87 -0.22 +0.86
India 64.97 64.97 +0.00 +4.58
Brazil 3.13 3.13 -0.02 +4.07
Mexico 18.87 18.88 +0.06 +9.77
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 327 -2 .03 7 69.35 1
All data taken from Reuters at 08:58 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see)
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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