The rand weakened on Tuesday as investors kept an eye on developments in the Middle East following US President Donald Trump’s decision to pause a planned attack on Iran.
The rand traded at 16.7575 against the dollar, down 1% from its previous close. Trump stated on Monday that he had suspended the attack to allow time for negotiations aimed at reaching a deal to end the conflict.
Analysts noted that the longer this conflict continues, the greater the probability that the rand will face pressure from any additional shocks to the global economy that could undermine economic confidence and risk appetite.
The US dollar also rose 0.4% against a basket of currencies, while gold prices, a key export for South Africa, fell 0.6%. Domestic attention will be focused on the April inflation data set to be released on Wednesday.
Analysts polled by Reuters expect inflation to rise to 3.9% year-on-year, up from 3.1% in March, reflecting the economic pressures stemming from the conflict in the Middle East.
The statistics agency will also publish March retail sales data on Wednesday. However, analysts suggest the figures may not reflect significant weakness, as they cover a period before the full effects of the conflict were felt.
On the Johannesburg Stock Exchange, the Top-40 index was down by 1%. Additionally, South Africa’s benchmark 2035 government bond weakened, with yields rising by 9 basis points to reach 8.94%.
On Wednesday, 20 May, the rand was trading at R16.70 to the dollar, R22.37 to the pound, and R19.38 to the euro. Gold is trading lower at $4,463.61 an ounce, while oil prices were at $110.50 a barrel.
5 important things happening in South Africa today
Gems medical aid in deep trouble: The Government Employees Medical Scheme (Gems) anticipates its solvency ratio will fall below the 25% statutory threshold by the end of the year, which threatens its financial stability, largely due to union pressure to limit monthly premium increases. [Business Day]
Gwede Mantashe under fire: Mineral Resources Minister Gwede Mantashe is in hot water over South Africa’s 87% year-on-year increase in coal exports to Israel, which critics have argued is enabling its continued military campaign in Gaza. However, Mantashe defended the exports to Israel, noting that businesses sell to customers, not states. [News24]
Eskom threatens to cut Joburg’s power: Power utility Eskom has once again threatened to cut power to the City of Joburg over unpaid bills and money soon due, which has now reached R6.8 billion. [BusinessTech]
Changes to Amazon deliveries in South Africa: Amazon’s marketplace in South Africa has ended its long-running promotion that offered free delivery on all orders, with the option to upgrade to same-day delivery for R2. Free delivery on items shipped by Amazon for orders over R500 remains available. However, priority shipping now costs R90 regardless of the order value. [MyBroadband]
City crackdown hits top companies: The City of Johannesburg has cracked down on illegal outdoor advertising. The crackdown in recent months affected many top companies, including Absa, WeBuyCars, Jeep, Engen, and Savanna. The City of Johannesburg has started naming and shaming companies whose billboards it is removing. [Daily Investor]