South African rand holds firm amid cooling US data, Middle East uncertainty

JOHANNESBURG: South Africa’s rand was little changed on Friday as easing US inflation boosted speculation the Federal Reserve would keep rates on hold, while Middle East tensions supported the dollar.

At 0818 GMT, the rand traded at 16.18 against the dollar, little changed from its previous close of 16.1924.

Risk sentiment remained fragile after the United States signalled it could maintain its naval blockade of Iran indefinitely and step up economic pressure on Tehran, highlighting the risk of a prolonged Middle East conflict.

The South African currency typically gains when risk appetite is strong, but fears that the US-Iran standoff could disrupt oil supplies and hurt global growth may keep investors cautious.

The dollar remained range-bound after softer-than-expected US producer prices data reduced expectations for a September Fed rate hike.

“The rand is consolidating within a R16.05/R16.25 range with good two-way flows in the market. From a technical perspective, the local currency is looking slightly overbought, and a correction is possible in the short term,” said Andre Cilliers, currency strategist at TreasuryONE.

On the Johannesburg Stock Exchange, the Top-40 index was down 0.6% in early trade.

South Africa’s benchmark 2035 government bond was slightly weaker in early deals, with the yield up 2 basis points to 8.435%.