Rand off its best levels as dollar rebounds against the euro

The rand was steady on Tuesday afternoon, but off intraday best levels as the dollar turned around against the euro amid concern about further political turmoil in the UK.

The euro and pound have weakened a day after two high-profile resignations from the UK cabinet sparked speculation about a new general election, Dow Jones Newswires reported.

Uncertainty exists about the practical implementation of UK Prime Minister Theresa May’s new approach to Brexit negotiations, with EU leaders so far having showed little reaction to the tough negotiations that lie ahead.

The pound also felt pressure as the uncertainty over Brexit could prompt the Bank of England to hold off raising rates in August, even if economic data showed improvement, ING analysts said in a note.

Earlier, global asset manager BlackRock announced it was downgrading its exposure to European markets. Investors had moved money out of European equity funds for 17 straight weeks.

BlackRock said an anti-establishment, eurosceptic Italian government and renewed tension over immigration had raised long-term risks for the EU’s future. “A noncommittal outcome at the most recent summit of EU leaders gave us little confidence that a crisis would be handled well.”

At 3pm, the rand was at R13.4119 to the dollar from R13.4104, after earlier firming to R13.3407. It was at R15.7115 to the euro from R15.7603, and R17.8019 to the pound from R17.7863. The euro was at $1.1716 from $1.1750.

Local bonds were weaker, with the R186 bid at 8.68% from 8.615%.

The US 10-year treasury was last seen at 2.8707% from 2.8598%. Nedbank analysts said technical analysis showed that a move above a yield of 2.87% would signal a bear move to 3.03%. “We, however, remain of the opinion the 3.12% top will remain intact.”

The UK 10-year gilt was at 1.298% from 1.2565%.