The South African rand weakened early on Thursday as escalating Middle East tensions and surging oil prices stoked inflation fears and dampened risk appetite ahead of key domestic data.
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At 0653 GMT the rand traded at 16.5625 against the dollar , roughly down 0.4% from Wednesday’s close.
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The local currency has been under pressure recently, shedding more than 3% last week, pressured by rising oil prices that pose a challenge for South Africa as a net energy importer.
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Iran said the world should brace for $200-a-barrel oil after its forces struck merchant ships on Wednesday, while the International Energy Agency urged a massive release of strategic reserves to blunt one of the worst oil shocks since the 1970s.
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Oil prices rose over $100 a barrel, adding to inflation pressures, as Iran stepped up attacks on oil and transport facilities across the Middle East.
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“For now, the key thing investors are watching is whether the Strait of Hormuz reopens – because that will likely determine whether oil prices settle down or continue climbing,” said Wichard Cilliers, head of market risk at TreasuryONE.
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Cilliers added that the rand “will remain volatile” until there is clarity on the duration and scale of the conflict.
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The South African Reserve Bank will publish fourth-quarter current account data (ZACACT=ECI), opens new tab at 0900 GMT.
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Statistics South Africa will then release the January mining output at 0930 GMT and manufacturing production data at 1100 GMT.
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South Africa’s benchmark 2035 government bond was weaker in early deals, as the yield rose 13.5 basis points to 8.61%.
