South African rand holds firm amid cooling US data, Middle East uncertainty

According to Business Recorder, the South African rand barely moved on Friday, with the currency changing hands at 16.18 per dollar at 0818 GMT against a previous close of 16.1924. Easing US inflation lifted expectations that the Federal Reserve would leave interest rates unchanged, while tensions in the Middle East provided support for the greenback.

Sentiment toward risk remained fragile after the United States signalled it could keep its naval blockade of Iran in place indefinitely and increase economic pressure on Tehran. The rand typically strengthens when appetite for risk is high, but worries that the US-Iran standoff could disrupt oil supplies and weigh on global growth may keep investors cautious.

Softer-than-expected US producer price figures reduced bets on a Fed rate increase in September, leaving the dollar within a narrow band. TreasuryONE currency strategist Andre Cilliers said the rand is trading between R16.05 and R16.25 and that a short-term correction is possible after it looked slightly overbought. Elsewhere, the Top-40 index on the Johannesburg Stock Exchange slipped 0.6% in early trade, while the 2035 government bond yield rose 2 basis points to 8.435%.