South Africa’s rand showed pressure from the crisis surrounding President Jacob Zuma yesterday, as other emerging markets largely shrugged off a relapse in oil prices with a little help from a weak dollar.
The rand weakened 0.65% and the price of a 10-year benchmark government bond slipped ahead of today’s planned parliamentary debate in South Africa on a motion to impeach Zuma.
The currency had rallied on Friday on speculation that Zuma might quit following a ruling he flouted laws by failing to pay for some of the state-funded upgrades to his home.
But it has surrendered most of its gains after his African National Congress (ANC) party reaffirmed its support for him.
“He survived the ANC meeting and that means he will most probably survive until autumn,” said Aberdeen Asset Management portfolio manager Viktor Szabo. “It is not Brazil. He is much less likely to be impeached.”
The benchmark emerging market stocks index inched up 0.17% meanwhile, after solid US jobs data on Friday had bolstered confidence in the world’s biggest economy but not driven up bets on interest rate rises.
A drop in crude prices back below $39 a barrel also meant individual market performances were mixed.
Stocks in oil-rich Russian stocks were among the biggest fallers, with dollar-denominated shares down around 1% and the rouble down 1.4%. Neighbouring oil producer Kazakhstan’s tenge lost 0.47% too. Regional focus was also on Azerbaijan and Armenia after a new wave of fighting broke out in the Nagorno-Karabakh area on Saturday, killing dozens and drawing international calls for an immediate ceasefire to stop the violence spreading.
Benchmark Azeri and Armenian bonds both lost modest ground. The outbreak of fighting fanned worries about the undercurrent tensions between Russia which has troops in Armenia, and Turkey which has historic ties with Azerbaijan.
Eastern European bourses were mostly in the red but currencies fared better, with the Polish zloty firming 0.33% against the euro, whilst the Hungarian forint firmed 0.2%.
Rating agency Moody’s said yesterday Poland’s current constitutional court spat, which centres on the government’s bid to increase the number of its judges needed to make rulings, was driving up political risk and negative for the country’s credit rating.
The Indian rupee meanwhile gained 0.38% against the dollar after strong factory activity data for March saw it expand for the third straight month.
This could deter the Reserve Bank of India from cutting interest rates when it meets today.
The Turkish lira drifted lower after March consumer price inflation fell to a seven-month low.
William Jackson, senior EM economist at Capital Economics, said this made it more likely the central bank would follow up its recent interest rate cut with another one this month.
“Government pressure on the central bank to lower interest rates is likely to become more vocal,” he said in a note.