Cape Town — Data from the central bank showed that South Africa’s rand weakened against the dollar early on Wednesday, pulled down by souring risk sentiment.
The rand traded at 18.58 per dollar, 0.38% softer than its previous close, with the dollar index last trading up 0.14% against a basket of currencies, Reuters reported.
As with most emerging market currencies, the rand is risk-sensitive and takes its cues from global drivers such as the direction of dollar in addition to local economic data.
“Risk sentiment has fallen a touch as geopolitical tensions in the Middle East are on the rise again,” said Andre Cilliers, currency strategist at TreasuryONE.
Israeli forces on Tuesday seized the main border crossing between Gaza and Egypt in Rafah, the southern Gaza city where more than one million displaced Palestinians have sought shelter during Israel’s seven-month-old offensive.
Central bank data earlier showed South Africa’s net foreign reserves rose to $57.851 billion at the end of April, from $57.513 billion in March.
According to IOL, the dollar index rose above 105.5, hitting one-week highs as hawkish remarks from a Federal Reserve official lifted the currency.
“There was little by way of new developments yesterday. Markets did, however, keep a close eye on Fed speak, which, once again, talked down the chance of any imminent rate cuts.” Bianca Botes, a director at Citadel Global, said.
The JSE index edged lower, to around 76830 points, after three successive sessions of gains, mainly pressured by resource-linked stocks and telecommunication companies, according to Trading Economics.
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Compiled by Matthew Petersen
