Rand firmer as investors’ appetite for risk remains unspoiled
UK Prime Minister Theresa May’s crushing Brexit defeat had failed to spoil the mood on global markets on Wednesday afternoon, with the rand eking out gains against major global currencies.
At 2pm, the rand was 0.38% stronger at R15.6239/€, 0.14% stronger at R17.612/£, while remaining flat at R13.7296/$. The euro was 0.29% stronger at R1.1384/$.
The rand remains at a one-month high against sterling, which had whipsawed on Tuesday evening after the UK parliament overwhelmingly rejected May’s draft Brexit deal. This has set the stage for a no-confidence vote in the prime minister scheduled for 9pm local time on Wednesday, and added to the uncertainty of when — and if — the UK will leave the EU.
The rand has been quite resilient this week, and remains the best-performing emerging-market currency against the dollar so far this year. It has gained 4.47% against the dollar so far in 2019, 5.08% against the euro, and 3.68% against the pound.
Positive developments in the US-China trade war, and a dovish stance from the US Federal Reserve, has supported risk-assets, analysts said, despite increasing concerns about slowing global economic growth.
Brexit continues to serve as a headwind to global growth, but it seems Tuesday’s events have been largely priced in, said Mercato Financial Services analyst Nico du Plessis. How markets ultimately react to Brexit developments this week will depend on the no-confidence vote, which could take some time for the market to understand.
“For now, focus will turn elsewhere and and by virtue of equity markets trading a little firmer this morning, expectations are that risk appetite will remain supportive of further rand appreciation, both against the pound as well as the dollar, that may yet test levels closer to the R13.60/$ mark,” he said.
Local data earlier failed to support the currency, despite retail sales for November growing 3.1% year-on-year in November. The Bloomberg consensus had been for growth of 2%.