South African markets joined its global peers in a relief rally on Wednesday morning as investors took a temporary boost ceasefire between America and Iran.
At 9.15am, the rand was trading at R16.37 against the dollar, up 2.5% from Tuesday's close.
Immediately after the market open, the JSE all-share index was up 4.9%, in line with trends in international stock markets. In Asia, Japan's Nikkei jumped nearly 5.5%, while the Hang Seng was up nearly 3% and the Shanghai Composite was up 2.5%.
Local markets followed their international peers in welcoming the two-week ceasefire agreed less than two hours before a deadline set by US President Donald Trump for Iran to reopen the Strait of Hormuz or face devastating attacks on its civilian infrastructure.
Oil prices fell below $100 a barrel, falling as much as 15% at one point as global investors hoped to restart the flow of oil and gas through the Strait of Hormuz, which supplies about 20% of the world's energy.
The dollar, which had become a safe haven during the six-week conflict between the US-Israel and Iran, retreated sharply, leading to a recovery in the rand and other emerging market currencies.
“Closer to home, the rand is one of the most obvious beneficiaries of the risk-on mood,” said Andre Cilliers, currency strategist at TreasuryOne.
He said the rand had strengthened against the dollar as investors turned to emerging market currencies due to easing geopolitical tensions and low oil prices.
“Traders will also be keeping an eye on the Federal Reserve's March meeting due to be released minutes later today, which may provide clues about the path of rates, a key driver of rand direction in the coming weeks,” Cilliers said.
the world is in disarray
The six-week conflict has sent oil prices soaring, reignited inflation fears and muddied the outlook for global rates, forcing governments and companies to cover against sudden energy shocks, Reuters reported.
“When you consider 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 quoted Matt Simpson, a senior market analyst at StoneX, as saying.
“Markets may worry about complications later. For now, they have been given the green light to rally.”
Gold, which has lost its safe-haven status at a time of global turmoil amid the latest Middle East conflict, was up about 2.6% and platinum rose more than 5%.
Cilliers said analysts said if the ceasefire holds, the US Federal Reserve may have room to consider a rate cut later this year, which would provide further support to gold.
“The main level to watch is $5,000/oz. It is too early to assess the full economic damage from weeks of higher energy prices and supply chain disruptions,” he said.
day trading
Additional reporting Jacob Webster