Rand falls as Brexit delay fuels global risk

The rand tends to move disproportionately when there is turmoil in financial markets as it is one of the most liquid of the emerging-market currencies and often sold to help cut overall exposure to riskier assets.

At 6pm, the rand had dropped 1.95% to R14.4545/$, after earlier weakening by as much as 1.99%, the weakest since November 13.

Against the euro, it had fallen 1.8% to R16.4349/€ and it was 0.44% weaker against the pound at R18.0858/£. The pound had fallen 1.7% against the dollar to its weakest level since April 2017.

May’s decision to pause the Brexit vote would be viewed poorly by the market, said Herenya Capital Advisors founder Petri Redlinghuys, citing an uncertain environment faced by companies trying to find ways to mitigate the effects of the UK’s departure from the EU, set for March 29 2019.

“We are seeing a realisation that things in Europe are getting messy, and economic growth is looking extremely fragile,” Redlinghuys said.

While the decision to put off the parliamentary vote on the terms of the agreement that May negotiated with the EU on Britain’s departure from the bloc may make a second referendum more likely, it also increases the risk of the country crashing out without a deal, leading to political and economic chaos.

Renewed volatility in the rand could be seen as vindication for the Reserve Bank raising interest rates in November for the first time in more than two years. The Bank warned then that the relative calm in emerging-market currencies might not last long.