Rand slides and oil surges as Russia attacks Ukraine

The rand fell in early morning trade as uncertainty and tensions around the Russia/Ukraine crisis led to a global sell-off.

After strengthening to near R15/dollar after a broadly positive national budget speech on Wednesday afternoon (23 February), the local currency fell by more than 30 cents overnight after Russian president Vladimir Putin announced a military assault on Ukraine.

Brent crude futures jumped more than 3.5% to shoot past $100 a barrel on Thursday for the first time since September 2014.

In response to the military action, US president Joe Biden announced he would impose ‘severe sanctions’ on Russia after condemning what he called an ‘unprovoked and unjustified attack’, Bloomberg reports.

Putin announced in a televised speech early Thursday that he had decided to order a ‘special military operation’ to ‘protect’ the Donbas region of Ukraine, saying the US had crossed the Kremlin’s ‘red line’ by expanding NATO in Eastern Europe.

In the speech, Putin said Russia didn’t plan to occupy Ukraine but accused the US of refusing to negotiate on Russia’s security demands.

At 08h25 on Thursday (24 February), the rand was trading at the following levels again the major currencies:

  • Dollar/Rand: R15.26
  • Euro/Rand: R17.17
  • Pound/Rand: R20.61

“The market has been looking for an excuse to sell off and now they have a real one,” George Kanaan, head of cash equities at BarrenJoey Capital told Reuters.

“With so many exchange-traded funds and automation, they flick the switch when there is uncertainty like this and buyers go on strike. That is why we are seeing the market gap like it is. There is brinkmanship happening and who knows where it can go from here.”

Analysts have warned that the Russia/Ukraine crisis is also likely to have impact on global fuel and energy prices.

Trading in many asset classes has been volatile since Russian President Vladimir Putin’s dispatch of troops earlier this week into parts of Ukraine. This triggered sanctions from Western countries and threats of more if Moscow advances further

“Escalation of tensions in Ukraine will exert upward pressure on global inflation through higher energy prices – Russia is a major energy exporter – but also food prices, so we expect to see higher core inflation that will last longer,” said Carlos Casanova, section economist at UBP.

With further reporting by Bloomberg. 

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Rand slides and oil surges as Russia attacks Ukraine