South Africa Rand Firmer on Broad-Based US Dollar Weakness
The South African rand is trading slightly firmer against FX majors on Tuesday as broad-based US dollar weakness provided support to emerging-market currencies.
The inflation outlook has shifted to an uptrend, with expectations that the South African Reserve Bank (SARB) will continue its monetary policy tightening due to the global energy market crisis.
The renewed geopolitical disturbance nudged investor sentiment towards risk, supported by stronger-than-expected Chinese trade data, which pointed to resilient global manufacturing activity and commodity demand.
China’s June exports and imports both significantly exceeded expectations, reinforcing confidence in the global growth outlook.
The rand is changing hands at R16.45 to the US dollar, R18.74 to the euro and R21.97 to the pound, First National Bank (FNB) said in a brief on Tuesday.
In the global commodity market, oil prices are trading sharply higher on Tuesday after the US and Iran intensified military action in and around the Strait of Hormuz.
Market concerns escalated following reports that Iranian missiles struck two oil tankers transiting the strategic shipping route, while tanker traffic through the strait fell to its lowest level in two months.
Investors have priced in a higher geopolitical risk premium amid concerns that further escalation could disrupt global energy supplies. Brent crude oil is trading at US$84.76/barrel.
Also, at $4023 per ounce, gold price is trading modestly higher this morning as investors continue to seek safe-haven assets amid escalating tensions between the US and Iran.
However, gains remain relatively contained as markets await US inflation data for further clues on the Federal Reserve’s interest rate path.
Rising oil prices have increased concerns that inflationary pressures could remain elevated, potentially limiting the scope for future interest rate cuts and reducing the attractiveness of non-yielding assets such as gold. Naira Slides on FX Market Liquidity Squeeze, US Dollar Rally

