The arrest of Glen Point Capital co-founder Neil Phillips for alleged market manipulation has put the spotlight on rand trades in the closing days of 2017. At the time, however, traders were too caught up in “Ramaphoria” to notice anything untoward.
South African assets rallied from November 2017 to February the following year after Cyril Ramaphosa was elected as leader of the ruling African National Congress in December, setting him on a path to replace the scandal-ridden Jacob Zuma as the country’s president.
Ramaphosa’s promise to clean up corruption and nepotism in government and state-owned companies sparked enthusiasm in markets — labeled “Ramaphoria” by some traders — with the rand advancing 11% that December.
“The focus was on Ramaphosa and the excitement that brought to a whole number of domestic issues,” said Henrik Gullberg, a macro strategist at Coex Partners Ltd. who watched developments at the time. “So it’s hard to disentangle what was related to that and what could have been other factors, but at the time I can’t say I remember that I found something odd.”
According to prosecutors, Phillips began making spot trades on USDZAR late on Christmas Day, and directed a Singapore-based employee of an unidentified bank to sell $725 million in exchange for more than 9 billion rand, to push the currency pair below an options barrier of 12.50 rand per dollar. He collected a payout of $20 million for himself and a client, US prosecutors alleged.
The rand climbed about 2.7% to around 12.27 per dollar between Dec. 23 and Dec. 27, outperforming all major emerging-market peers. But the spot trading that month didn’t look suspicious, as the currency was on a strengthening trend, according to Robert Hoodless, head of FX and macro analysis for Europe and Americas at in Touch Capital Markets.
“Ultimately the buyers of rand were proved right, as the move continued until late February before starting to reverse,” said Hoodless. “The more disturbing speed seen in mid-December appears somewhat at odds with other days’ trading in the month, but the rand is well known for being chaotic and likely to produce some of the larger standard-deviation moves in the forex world.”