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Rand rallies against the dollar as Brexit vote nears

Rand rallies against the dollar as Brexit vote nears

The rand rallied against the dollar in afternoon trade on Monday, consolidating back below R15 against the US dollar ahead of a British referendum on whether to remain a part of the European Union (EU).

The rand was trading at session highs of R14.79 versus the dollar, up 2.2%, its strongest in more than a week according to Thomson Reuters data.

Reuters noted that the local currency’s position is as a result of stronger global stocks and a retreat in “safe haven” assets like gold and the yen after polls showed support for Britain staying in the EU regaining momentum before a referendum on Thursday.

“Brexit has really been playing a massive role in the strength in the market. Last week we saw a lot of risk aversion because the “leave” camp was leading the polls, but that sort of changed around over the weekend,” Capilis Asset Managers head of forex Giacomo Bonavera said.

A vote for Britain to leave the EU would knock risk appetite and weaken the rand, while a vote to remain would likely lead to further gains in the short-term, Reuters reported.

“But in the longer-term outlook I feel like there are still some other worries around the market such as the global growth concerns,” Bonavera added.

The rand has gained more than 4% against the dollar so far in 2016, it said.

Finance Minister Pravin Gordhan said the UK pulling out of the EU would “complicate life” for South Africa.

“It may not immediately impact negatively, especially on trade, but the uncertainty could have a serious impact on us as a country,” the Sunday Tribune quoted him as saying in Durban on Saturday.

Speaking at the same event, economist Dawie Roodt said a “Leave” vote would strengthen the euro and the dollar and weaken the pound and the rand.

Umkhulu Consulting’s Adam Phillips said on Monday that the volatility in the market is at “absurd levels” as a result of the Brexit vote.

“Every currency in the world is now affected by what is going to be decided on Thursday,” he said. “It might be that the Brexit vote still has a nasty bite to it that will affect the rand in the short term.

“Once the vote has been digested, we should start concerning ourselves with our (South African) local elections, which have been taking a back seat in the last couple of weeks.”

Odds are for a rand-positive “remain” vote, said RMB analyst John Cairns on Monday.

“A ‘Leave’ would have a much bigger result,” he said. “It would push USD/ZAR up, we guess, by 3% to 5% as risk aversion spikes. GBP/ZAR would go the other way from USD/ZAR, pushing higher on a ‘remain’ and falling on a ‘leave’. We expect EUR/ZAR to trade in the same direction as USD/ZAR, although not moving to quite the same extent.”

Bidvest said in a market update on Monday that in the near term, focus will fall largely on the forthcoming EU referendum vote. It also pointed weekend comments by Gordhan who was quoted as saying “It may not immediately impact negatively, especially on trade, but the uncertainty could have a serious impact on us as a country.”

By virtue of SA being exposed both to the UK and the EU through trade, there will be a knock on effect to SA. That effect would be even greater if banks were severely affected.

“The sideline seems to be the safest place for traders this week as the risk of calling it wrong could see a position swing massively one way or another,” Bidvest said.

The rand traded at R21.69 against the pound, and R16.74 against the euro.

Reporting with News24

More on the rand

Rand stronger as ratings firms give SA room to breathe

Rand eyes R15 to the dollar as SA awaits Fitch rating, GDP data

Rand back below R15 vs the dollar as ratings agency says no recession for SA


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  • Willow

    Duct-tape on Zuma & Clowns, please.

  • Muri

    This is boring. All the hype of brexit for nothing. The Jo Cox event couldnt have happened at a worse time. Brits should vote without being manipulated. Why would the euro be stronger? The only way the euro would be stronger is if they kick off corrupt and bankrupt Greece, which is clearly not making any progress. Then there is Spain and Italy…the reason EU will stay weak is because these debts. But then, I guess Ireland also doesnt help.

  • Muri

    The headline should read: rand rallies as PTA and Mamelodi services, shops, etc. are burnt. The rand does not reflect the true state of SA.

  • Khalsa Singh

    BREXIT…… only lunatics and Germans would stay in the EU.
    Lets see if the Brits still have pride

  • Melan Beko

    So rand goes down and yet petrol prices continue to increase. Price of food has increased by almost 100% since jan this year because of drought, oil prices and the toothfairy. Greedy corporations are hellbent on destroying the middle class. Soon there will only be super rich or very poor in this country

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