The South African rand lost ground on Thursday after testing one-month highs on Wednesday.
Image: AI / ChatGPT
The South African rand retreated on Thursday morning after testing one-month highs on Wednesday, following the US and Iran's agreement on a two-week truce.
This saw the local currency make significant gains on Wednesday, trading as low as $16.30 to the US dollar. On Thursday morning, it was trading slightly weaker against the greenback, at R16.44, after Israeli attacks on Lebanon killed at least 182 people, exposing the fragility of the Iran ceasefire as Tehran threatened to resume hostilities.
“While Iran and the United States (US) are set to start peace talks in Pakistan on Friday, the ceasefire appears all but stable,” said Bianca Botes, managing director at Citadel Global.
“Yesterday, Iran accused the US of several breaches of the ceasefire agreement, leading to the closure of the Strait of Hormuz, once again.”
Although Wednesday saw something of a Wall Street rally, with the S&P 500 climbing 2.5% and the Dow and Nasdaq gaining almost 3%, futures came under pressure during after-hours trade as uncertainty kicked in, with S&P futures losing 0.2%.
Thursday will see the release of the key PCE inflation reading in the US as well as initial jobless claims data, while on the South African front, manufacturing production figures are due to be released.
Asian stocks were all down in early trade on Thursday as attention turned to the crucial peace talks that are expected to commence in Pakistan on Friday.
"Many questions remain with the 10-point plan that Trump has received from Iran (which includes Iranian control of the Strait of Hormuz, US acceptance of Iran's uranium enrichment programme, the end of all sanctions and withdrawal of the US military from the Gulf region) is at odds with Trump's 15-point peace plan," wrote National Australia Bank's Skye Masters.
Oil prices also rose on Thursday, with Brent Crude oil testing $97 per barrel in early trade after plunging more than 13% the day before when news of the ceasefire broke.
Although oil remains significantly lower than its pre-ceasefire levels, this is not expected to translate into fuel price relief for South Africans in May.
Nolan Wapenaar, co-chief investment officer and head of fixed income at Anchor Capital, said, “While the oil price is likely to decline from its peak, it is expected to remain materially above pre-war levels, and SA’s April fuel price increase is expected to be delayed in its severity rather than reversed.”
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