South African rand slips as stronger dollar and oil supply risks weigh

The South African rand lost ground in early trading on Wednesday, according to Business Recorder, as a firmer greenback dampened appetite for riskier holdings. At 0635 GMT the currency was quoted at 16.5850 to the dollar, roughly 0.3% weaker than its previous close. Investors were also wary of threats to oil supply, which kept sentiment cautious.

The dollar index inched up as traders waited for the minutes from the Federal Reserve's September gathering, which could reveal whether officials still lean toward further US rate increases. Crude prices climbed because a storm threatening American oil-producing areas and Houthi attacks on Saudi Arabia were seen as outweighing extra supply from the Middle East. South Africa imports most of its fuel, so its economy remains exposed to global oil price swings since the conflict with Iran began in late February.

ETM Analytics said in a note that the rand had weakened about 3.5% over the past month, with heavy petroleum imports, particularly diesel, sustaining dollar demand and making the currency more sensitive to oil. Separately, the benchmark 2035 government bond eased slightly in early dealings, with its yield up 2 basis points to 8.825%.