Picture: REUTERS
Picture: REUTERS

THE rand weakened further against the dollar in late trade on Wednesday as the political wrangling between senior police unit the Hawks and Finance Minister Pravin Gordhan continues.

The Hawks are seeking legal advice on a way forward after Mr Gordhan missed a second deadline to respond to questions on an alleged ‘rogue unit’ at the South African Revenue Service (SARS).

At 3.29pm, the rand was at R16.1713 to the dollar from R15.9259 at Tuesday’s close. The rand was at R17.9028 against the euro from R17.6878 and at R22.7548 against the pound from R22.5397.

The euro was at $1.1071 from $1.1106.

The rand earlier weakened to R16.2444 to the dollar as representatives of credit rating agency Moody’s arrived in SA to decide whether SA’s sovereign rating should be downgraded to junk.

Standard Bank said in a note that domestic issues linked to the finance ministry with deep political connotations had created instability, investor angst and a deterioration of asset prices.

The rand traded almost exclusively on domestic developments, the bank said.

The pace and nature of the rand’s fall, along with local bonds being pounded, show that investors are very jittery and massive uncertainty is being caused by the saga enfolding between the Hawks and Mr Gordhan, Standard Bank said.

"The rand is coming under pressure from local political developments and hopefully there can be some clarity and finality notwithstanding decisive and proper leadership to bring back some stability. If not, then there could be much more carnage for local asset prices and more violent and pronounced weakness for the rand," the bank said.

The Treasury meets Moody’s later this week, and the other two ratings agencies were without doubt scrutinising the political noise emanating from SA presently, the bank said.

Meanwhile the dollar strengthened against a basket of currencies on Wednesday, contributing to rand weakness, ahead of the US Federal Reserve’s interest rate announcement later on Wednesday.

The Fed concludes its two-day monetary policy meeting later in the day. While no change to interest rates was expected, investors would assess the bank’s policy statement and economic projections as well as chairwoman Janet Yellen’s news conference for guidance on what Fed officials would do next, Dow Jones Newswires reported.

Recent US economic data, including a strong jobs report, has helped boost expectations among investors that the Fed will raise interest rates later in the year.