South African rand steady after Venezuela shock

JOHANNESBURG: The South African rand was steady in early trade on Monday, as investors considered the implications of US military action in Venezuela, escalating geopolitical tensions and lifting safe-haven demand.

At 0657 GMT the rand traded at 16.5050 against the dollar, a whisker away from Friday’s closing level of 16.5075.

The United States captured Venezuelan President Nicolas Maduro over the weekend to face drug-trafficking charges, while President Donald Trump announced that he was putting Venezuela under temporary American control.

Trump said as part of the takeover, major US oil companies would move into Venezuela, which has the world’s largest oil reserves, and refurbish badly degraded oil infrastructure, a process experts said could take years.

“So far, the ZAR has not responded negatively to this weekend’s news. The oil price has not moved significantly, given Venezuela’s substantial reduction in oil exports and production.

If anything, it might slide further if investors believe that the US might oversee a revitalisation of Venezuela’s oil industry,“ ETM Analytics said in a research note.

South Africa has called for an urgent United Nations Security Council session following the unilateral military action by the United States in Venezuela.

“Investors might want to price in some consequences of SA’s hardening stance against the US and what that might mean for relations with the US, but even on that front, there has been so much that has come from the existing breakdown of relations with the US that it is unclear whether there is much more for the US to do,” ETM Analytics said. South Africa’s benchmark 2035 government bond was firm in early deals, as the yield fell 2 basis points to 8.22%.