South African markets joined their global peers in a relief rally on Wednesday morning as investors cheered the temporary ceasefire between the US and Iran.
At 9.15am, the rand was trading at R16.37 to the dollar, a gain of more than 2.5% from Tuesday’s close.
Shortly after the market’s opening, the JSE all share index was up 4.9%, following the trend in international stock markets. In Asia, Japan’s Nikkei jumped about 5.5%, while the Hang Seng gained almost 3% and the Shanghai Composite was up 2.5%.
Local markets followed their international peers in welcoming the two-week ceasefire, agreed to less than two hours before US President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz or face devastating attacks on its civilian infrastructure.
Oil prices slid below $100 a barrel, declining as much as 15% at one stage as global investors hoped for a quick resumption of oil and gas flows through the Strait of Hormuz, which carries about 20% of the world’s energy supplies.
The dollar, which had become a safe haven during the six-week-long conflict between US-Israel and Iran, retreated sharply, prompting a recovery in the rand and other emerging market currencies.
“Closer to home, the rand is one of the clearest beneficiaries of the risk-on mood,” said Andre Cilliers, currency strategist at TreasuryOne.
He said the rand had strengthened against the dollar as investors rotated back into emerging market currencies due to easing geopolitical tension and lower oil prices.
“Traders will also be watching the release of the Federal Reserve’s March meeting minutes later today, which could offer clues on the rate path ahead, a key driver of rand direction in the weeks to come,” Cilliers said.
World in disarray
Reuters reported that the six-week conflict had sent oil prices soaring, reignited inflation fears and thrown the global rates outlook into disarray, forcing governments and companies to scramble for cover against a sudden energy shock.
“When you factor in that the two-week delay is longer than the original 10-day window set for the initial attack, it seems plausible that the worst of the conflict may now be behind us,” Reuters cited Matt Simpson, a senior market analyst at StoneX saying.
“Markets can worry about the complexities later. For now, they’ve been given the green light to rally.”
Gold, which had lost its safe-haven status in times of global turmoil during the latest Middle East conflict, was up about 2.6% and platinum rallied more than 5%.
Cilliers said analysts noted that a ceasefire, if it holds, could give the US Federal Reserve room to consider rate cuts later this year, which would further support gold.
“The key level to watch remains $5,000/oz. That said, it is too early to assess the full economic damage from weeks of elevated energy prices and supply chain disruption,” he added.
Business Day
Additional reporting Jacob Webster
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