Rand Gains as Softer US Inflation Weighs on Dollar
The South African rand (ZAR) gained momentum, strengthening against the US dollar on Wednesday as a softer US inflation print reduced Federal Reserve rate-hike expectations.
The local unit traded firmer as the market priced in softer-than-expected US inflation data, which weighed on the US dollar and improved sentiment towards emerging-market currencies.
US consumer prices fell as the US-Iran ceasefire, now terminated, eased energy prices, reducing pressure on the Federal Reserve to raise interest rates and supporting demand for risk assets.
The South African rand is changing hands at R16.34 to the US dollar, R18.69 to the euro and R21.89 to the British pound, First National Bank (FNB) said in a brief on Wednesday.
The uncertainties in the Middle East stoked pressures on energy costs, raising global inflation risks. Oil prices are trading higher as tensions between the US and Iran continue to raise concerns about potential supply disruptions in the Middle East.
Market focus remains on the Strait of Hormuz after the US reinstated its naval blockade on Iranian shipping and increased sanctions on Iran, fueling concerns that global oil supplies could be disrupted. Brent crude oil is trading at US$85.54/barrel.
Also, the gold price is trading slightly lower this morning as investors take some profits following recent gains driven by softer US inflation data.
While lower inflation has reduced expectations of further interest rate hikes and weakened the US dollar, improving risk sentiment has tempered demand for safe-haven assets. Gold is trading at ~US$ 4,032 per ounce. #Rand Gains as Softer US Inflation Weighs on Dollar#
