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Brexit sends rand diving worse than Nene firing

Jun 24 2016 07:43

Cape Town – The rand plunged more than the day President Jacob Zuma fired former finance minister Nhlanhla Nene on Friday as the UK voted to leave the European Union (EU).'

LATEST: Rand to remain highly volatile on Brexit victory - analysts

LIVE UPDATES: Watch the rand as Britain votes to leave EU - forecast

The rand dropped over 7.8% from midnight to Friday morning at 6:30 from R14.33 to R15.45, according to Adam Phillips of Umkhulu Consulting.

The rand plunged just over 5% when Nene was fired, with millions of rand wiped off the markets.

“I 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,” he said. “Five hours later and unofficially the British public has decided to leave the EU by 52% to 48%.”

By 08:30, the rand was 6.77% down at R15.57 to the dollar. The rand was up 1.52% against the pound at R21.23.

“This is not going to be good for farming exports,” said Phillips.

“The Japanese equity market is down over 7%,” he said.

“The SA Reserve Bank will be monitoring very closely, although there is not much they can do,” he said.

“Remember that the UK now has two years to finalise everything with the EU, so I am sure there are going to be plenty of meetings and new decisions from it,” he said. “As it stands this is a disaster for all emerging market currencies.”

RMB analyst John Cairns said on Thursday that a leave vote "would generate bedlam. Our guess would be for GBP/USD to drop 12% to 1.30, while USD/ZAR spikes 4% or more, well into the 15.00+ area. Volatility would be extreme."

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The pound collapsed to a 31-year low and currency, equity and oil markets went into freefall on Friday as projections showed Britain has voted to leave the European Union.Sterling crashed more than nine percent to $1.3305, its weakest level since 1985, while the greenback itself slumped below 100 yen for the first time in two-and-a-half years as traders fled to safety.

In the weeks leading up to Thursday's historic vote, there had been widespread warnings that a vote to leave would cause another rout across global markets that would wipe trillions off valuations, just months after a painful China-fuelled sell-off.

And as results came in, the doomsday scenario began to unfold as the BBC and other broadcasters called a win for "leave".

FULL STORY: Pound, Asia markets collapse as Britain quits EU

WATCH: The road ahead now that the UK has voted to Brexit

rand  |  brexit  |  eu


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