Nene's dismissal comes on the heels of a credit rating downgrade to just one notch above sub-investment grade by Fitch last Friday. South Africa's economy is barely growing, squeezed by low commodity prices globally and the near certainty of an interest rate rise in the United States next week.
Since his appointment in mid-2014 Nene has emphasized the need to cap government spending, reign in bailouts to state-owned firms, and limit the size of wage increases to government employees.
Government spending on public sector wages and welfare, accounting for the largest slice of government expenditure, has long been seen as the ruling African National Congress's chosen method to stay in power as it looses popular support.
The currency shed close to 5.0 percent to its lowest level ever, with analysts expecting it to fall even further as investors digest the news.
"The concern is the suddenness of the move," Nalla said. "Why redeploy a finance minister that was well received and well respected by the investor community," said head of research at Nedbank, Mohammed Nalla.
Zuma gave no details on why Nene, who has been serving as head of the treasury for just under two years, was dismissed.
On Monday, local media reported that Nene would likely be the victim of reshuffle by Zuma after he rebuked the chairwoman of state airline South African Airways, Dudu Myeni, seen as a close ally of Zuma, for mismanaging a billion rand deal with Airbus.
Nene's reluctance to rubber-stamp an ambitious government plan to build a nuclear power station to ease severe electricity shortages is also seen a part of his downfall.
Concern has mounted among opposition parties about the cost and that agreements to build the nuclear plants will be made behind closed doors.
Nene said in September that all deals relating to the nuclear project, which would add around 9,600 megawatts by 2030 at an estimated cost of as much as $100 billion, would be transparent and above board.
