Rand near 11-month high to the pound as market eyes new UK prime minister
Details on Eskom’s bailout will be watched by markets, while an eye is also on the UK, which is set to get a new leader soon
The rand was a little weaker against the dollar on Tuesday morning, but firmer against the pound, as markets waited to see who will be the next prime minister of the UK.
Eurosceptic politician Boris Johnson is the front-runner, with the prospect of his elevation prompting threats of resignations from Conservative Party ministers.
“If this happens, Johnson could replace outgoing ministers by harder-Brexiteers in his pursuit of a final resolution by October 31,” said London Capital Group senior market analyst Ipek Ozkardeskaya in a note. “This would raise the risk of a no-deal exit and should further weigh on the pound.”
Despite this, a Johnson victory could see the pound rally a little, as markets had extensively priced in a no-deal Brexit already, Johnson said. The announcement is expected at 12.45am local time.
At 9.30am the rand was 0.21% weaker at R13.8884/$, while remaining flat at R15.5404/€. The rand was 0.11% firmer at R17.278/£, near its strongest level since August 2018, although it did push to R17.2107/£ earlier in July.
The rand has appreciated 6.04% against the pound so far in 2019, compared with a 3.59% appreciation against the dollar.
Some focus is on parliament, where a special appropriations bill providing additional funding for embattled power utility Eskom is expected. Eskom will receive R59bn over the next two years, including R26bn in the current financial year, and R33bn for the 2020/2021 financial year.