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).’
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.”
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”.
