South African Rand Softens Versus Crosses as Brent Rises
The South African rand softened against crosses on Thursday as investor demand for the US dollar increased amid renewed tensions in the Middle East.
In its morning brief on Thursday, First National Bank (FNB) confirmed that the rand traded weaker as investors favoured the US dollar amid escalating tensions in the Middle East and growing concerns around global inflation.
Fresh US strikes against Iranian targets, retaliatory action by Iran and renewed uncertainty surrounding shipping through the Strait of Hormuz supported safe-haven demand for the dollar.
At the same time, rising oil prices increased concerns that inflation could remain elevated, reinforcing expectations that interest rates may remain higher for longer.
“This morning the rand is changing hands at R16.39 to the dollar, R18.72 to the euro and R21.95 to the British pound”, South Africa’s largest bank said in its note.
Reflecting uncertainties in the global commodity market, the yellow metal traded slightly weaker this morning despite heightened geopolitical tensions in the Middle East.
The Bank said while gold typically benefits from safe-haven demand during periods of uncertainty, investors remained focused on the inflationary impact of higher oil prices and the resulting prospect of a higher-for-longer interest rate environment, which lowers the attractiveness of the non-yielding bullion.
A firmer US dollar also weighed on the precious metal. Gold is trading at $4 064/ounce while oil prices are firmer after the US carried out additional strikes against Iranian targets and revoked the waiver permitting Iranian oil exports.
Markets reassessed the risk of supply disruptions and shipping interruptions through the Strait of Hormuz. These developments reintroduced a geopolitical risk premium into energy markets and supported crude oil prices. Brent crude oil has climbed to $78.95/barrel.#South African Rand Softens Versus Crosses as Brent Rises#
South Africa Rand Slips as Geopolitical Twist Favours US Dollar
