The Rand started off strong last week as markets prepared for the UK to vote to remain in Thursday’s referendum on EU membership.
The Rand strengthened 1.95% against the USD, the most since 3 June, closing at 14.8603; leading gains in emerging markets.
As the week went on, domestic economic news seemed to have taken a backseat in moving the Rand, although inflation data released on Wednesday hovered near the ceiling of the Reserve Bank’s target range.
Traders and market analysts anticipated caution, and a “wait and see” mood prevailed on the eve of the vote as markets awaited the referendum results. Implied Rand volatility jumped 16% to six-month highs in an already highly traded session.
As results began to indicate that the UK would leave the EU, the Rand dropped against the Dollar, by the most since 2008, and fell to a record low against the Japanese Yen. The Rand fell the most in emerging markets, shedding off as much as 7.6% before trading 6.6% weaker, at 15.3638, against the Dollar by Friday morning.
Adding to the ZAR headwinds, the currency declined against its major peers after President Jacob Zuma was refused permission to appeal a recent court ruling of corruption over an arms deal.
The weekend has done little to offer direction to the markets; if anything, it has aggravated the volatility. Moving in to the new week, easing measures from the Reserve Bank of South Africa appear almost certain given the economic ructions from Brexit. South African economic data releases are somewhat sparse this week and domestic data is unlikely to be hugely impactful as market sentiment will be the principle mover of currencies.