Analysts were shocked on Friday to see the rand dive more than the day President Jacob Zuma fired former finance minister Nhlanhla Nene as the UK voted to leave the European Union.<\/p>\n
Rand Merchant Bank analyst John Cairns was alarmed that the currency\u2019s losses against the dollar had swung between 5.5% to 8.5% on Friday, more than the 5% when Nene was fired.<\/p>\n
\u201cThis is at the larger end of the ranges that we had expected,\u201d he said.<\/p>\n
\u201cThe rand has been an underperformer, for no particular reason that we can think of,\u201d he said. \u201cThis allows some scope for recovery, but this will be swamped by the broader global moves.\u201d<\/p>\n
Umkhulu Consulting\u2019s Adam Phillips was just as taken aback.<\/p>\n
‘Disaster for all emerging market currencies’<\/strong><\/p>\n \u201cI am not sure what to write because even up to when I went to bed at midnight it looked like the remain were going to win,\u201d he said. \u201cAs it stands, this is a disaster for all emerging market currencies.\u201d<\/p>\n Cairns said the extreme rand volatility will continue on Friday.<\/p>\n \u201cRand spreads have been so wide you could drive a UK Independence Party bus through it,\u201d he said. \u201cThese will narrow as Joburg and London trade gets going, but will remain wide relative to normal.<\/p>\n \u201cThese losses might only be the start. No doubt many London traders are already at their desks, if they ever left them, but we\u2019ll need to see the full force of London and Wall Street before we can truly gauge the effects.<\/p>\n \u201cExpect an extremely volatile day ahead. Some global banks are even suggesting 20% losses across some equity markets.\u201d<\/p>\n Cairns said \u201cthe fires of British nationalism have led the UK to escape the EU. But the question is whether the EU will be able to escape the fires of British nationalism: if UK economic weakness or, more worryingly, anti-EU sentiment, spreads to the continent then the world will be in trouble.<\/p>\n \u201cMarkets have certainly been volatile so far,\u201d he said. \u201cTo rattle off some numbers quickly: the Nikkei is down 7.5%, Wall Street futures 4.5% and oil 5%. In the currency markets sterling has dropped 10%, the euro 4%, while the yen has gained 4.5% and the Swissie 2.5%.<\/p>\n \u201cGlobal policymakers will be sweating, having been fully suited up since early this morning,\u201d he said. \u201cInitial focus will be on dealing with liquidity shortages, notably of dollars. Multi-week the focus will be on policy rates.<\/p>\n \u201cOne silver lining from the result is that the Fed will hold off from hiking, while the BoE and ECB could ease further.\u201d<\/p>\n Fin24<\/a><\/p>\n Rand pounded as Britain votes to leave the European Union<\/strong><\/a><\/p>\n Rand below R14.50 vs the dollar ahead of Brexit vote<\/strong><\/a><\/p>\nMore on the rand<\/h3>\n