The sharp drop in the rand on Thursday left many forex traders stunned as they watched on their screens how the rand in a matter of hours tumbled nearly 3% against the dollar.

"It was the extent and speed of the rand’s losses that was surprising, especially as it was in an environment of dollar weakness," said Iquad Treasury portfolio manager Tony van Dyk.

The rand lost about 40c against the dollar on the day on news that a huge scandal had hit Brazil, with reports saying that Brazilian President Michel Temer had tried to bribe officials involved in the 2016 impeachment of former president Dilma Rousseff.

The allegations, based on apparent secret recordings, sent Brazil’s real currency down 7% and the Bovespa stock index 10% lower.

The rand lost more than 3% against the pound before recovering as the pound firmed to more than $1.30 on the day, the best since the Brexit vote. In late afternoon trade the rand settled at about R13.50/$, still 2.24% weaker from the morning’s opening trade, before firming to R13.38/$ in early evening trade.

Van Dyk said it was possible that the rand could weaken further to about R13.60/$, but from there a gradual recovery was more likely.

"The historical pattern of the rand has always been to spike weaker rather than firm strongly and we could see more of that."

The brittle local currency started the day at R13.1837/$ with expectations high that it break through R13/$ in a weaker dollar environment.

In early morning trade the rand steadied at about R13.20/$ as the news was factored in that the US justice department had appointed a special prosecutor to investigate the ties between President Donald Trump’s administration and Russia. This followed on Trump’s sudden dismissal of FBI director James Comey last week.

Equity markets developed cold feet with the Japanese yen and US Treasuries firming in risk-off trade.

The Dow ended its Wednesday session 1.78% lower at 20,606.93, its biggest one-day drop in six months.

Soon after trading on the JSE started on Thursday, the rand hit R13.40/$. Early on, Nedbank Corporate and Investment Banking analysts said it was "purportedly" related to Brazil.

"The rand started to weaken in Asian trading as the headlines regarding Brazilian political wrongdoing came to the fore," Nedbank said.

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