South African Rand Firmer Ahead of Foreign Reserves Update
South African rand opens firmer on Tuesday ahead of net and gross reserves updates from the central bank. The rand traded firmer in yesterday’s session and has held onto these gains this morning as investors responded positively to stronger global economic data, First National Bank (FNB) said in a brief.
The Bank said the local unit responded positively to a firmer-than-expected US ISM Services reading and Japanese household spending figures, which reinforced expectations of resilient global economic activity and lowered expectations of a Fed rate cut.
The rand is changing hands at R16.23 to the dollar, R18.56 to the euro and R21.71 to the pound, FNB said on Tuesday. Easing global tensions and lower oil prices have reduced the outlook for South African inflation.
Oil prices have fallen sharply, though supply risks have not fizzled out totally. Oil prices were firmer during early hours on Tuesday as stronger economic data from both major markets supported expectations for global energy demand, while reported attacks on vessels in the Strait of Hormuz raised supply-side fears.
However, investors continue to balance these upside developments against expectations of increased supply from OPEC+ producers, improving crude export flows through the Strait of Hormuz and the recent decision by Saudi Aramco to slash its August Arab Light official selling price for Asia by $11 per barrel. Brent crude oil is trading at $72.53/barrel.
The yellow metal weakened yesterday and remained under pressure this morning as a stronger US dollar and easing inflation concerns reduced demand for safe-haven assets. Gold is trading at $4 130/ounce during early hours on Tuesday in the global commodity market.
Investor sentiment was also supported by signs of resilient economic activity, while market participants continued to monitor the outlook for US monetary policy following comments that inflation risks have moderated.
On the economic calendar, South Africa’s net and gross foreign reserves for June are due, with net reserves forecast at $71.1 billion. S&P Cuts Nigeria’s Growth Projection, Raises Inflation Expectation
