Rand weakens on war talk

The first full trading week of the year is likely to be a bumpy one following the killing of a top Iranian commander in a US airstrike at the end of last week, says Bianca Botes, treasury partner at Peregrine Treasury Solutions.

As a result, the rand is expected to come under pressure, starting Monday (6 January) on the back foot.

“Brexit and the US-China trade war remain market influencers as we start 2020,” Botes said.

Bloomberg reported that oil extended its dramatic surge above $70 a barrel as the fallout between the US and Iran escalated after the assassination of one of the Islamic Republic’s most powerful generals.

Brent futures jumped by another 3% on Monday as the US State Department warned of a “heightened risk” of missile attacks near military bases and energy facilities in Saudi Arabia.

Prices got a further boost as president Donald Trump reiterated threats of retaliation should Iran “do anything” and vowed heavy sanctions against Iraq if American troops are forced to leave OPEC’s second-biggest producer.

Trump said he’s prepared to strike “in a disproportionate manner” and attack more than 50 sites if Tehran retaliates against Soleimani’s killing. The Middle East nation said it has to “settle a score with the US” and that it would no longer abide by limits on its enrichment of uranium. A vote by Iraq’s parliament to expel US troops from the country deepened the fallout, Bloomberg said.

Trump’s tough talk followed Iran’s threat of a protracted response, and eclipsed a previous assertion that the US hadn’t launched the attack near Baghdad airport on Thursday to “start a war”. The president is also sending more troops to the Middle East.

The Iranian leadership has signalled it will probably target US military installations and bases in the Middle East and mobilize its network of militias across the region, Bloomberg said.

Eskom said Monday that no load shedding expected, despite a constrained and vulnerable system. The state power utility was forced into power cuts over the weekend.

The rand traded at the following levels against the major currencies.

  • Dollar/Rand: R14.31  (1.49%)
  • Pound/Rand: R18.72  (1.10%)
  • Euro/Rand: R15.97  (1.42%)

Read: Here’s what R100 will buy you around the world right now

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Rand weakens on war talk