Rand slightly firmer ahead of Brexit vote

A softer dollar and higher gold price provided some support for the rand on Tuesday afternoon, albeit with an element of caution prevailing in the market ahead of key risk events.

British law makers will debate and vote changes on UK Prime Minister Theresa May’s current withdrawal agreement, with a vote expected at 9pm South African time. Proposals include ruling out leaving the EU with no deal, or a request to delay Brexit from its scheduled date of March 29.

The US-China trade war and US monetary policy may also give markets direction this week. High-level talks between US and Chinese officials begin on Wednesday, taking place amid rising tension over charges against tech giant Huawei.

Criminal charges related to alleged sanctions busting by Huawei in Iran threaten to overshadow the talks, analysts said.

Analysts expect the US Federal Reserve to retain its dovish tone as it starts its meeting on Wednesday, with the Fed signaling on Friday that it may reduce the pace at which it was unwinding its asset repurchasing programme.

The rand’s emerging-market peers were mixed on Tuesday, with a higher gold price providing some support for the local unit.

At 2.02pm, the rand was 0.34% firmer at R13.6173/$, 0.28% stronger at R15.5668/€, and up 0.37% at R17.91.02/£. The euro was 0.06% stronger at $1.1432.

Despite the declining importance of SA’s gold mining sector, it is still relevant, and could continue to support the currency in the short term, said Mercato Financial Services analyst Nico du Plessis, adding that there is still a window of opportunity for rand strength, but this may not last very long. 

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