South African rand weakens as stronger US dollar, oil prices weigh on currency

JOHANNESBURG, South Africa (XOL Africa) — The South African rand weakened against major currencies on Friday as stronger demand for the U.S. dollar, elevated oil prices and continuing geopolitical tensions in the Middle East pressured the local currency.

The rand traded at R16.68 per U.S. dollar, according to First National Bank (FNB), while it stood at R18.77 against the euro and R22.02 against the British pound.

FNB said the rand was under pressure from a firmer U.S. dollar, higher oil prices and persistent geopolitical tensions, with investors also exercising caution ahead of key U.S. labour-market data.
Global markets remained focused on developments in the Middle East, where concerns over a potential escalation in the conflict between the United States and Iran have raised fears of disruptions to energy supplies.

Brent crude rose to $102.10 a barrel, extending gains for a second consecutive session as investors assessed the risk of further disruptions to oil flows from the region.

Higher oil prices can put additional pressure on South Africa’s currency by increasing the country’s import costs and potentially adding to inflationary pressures.

Gold prices moved in the opposite direction. Gold settled at $4,187.13 an ounce, remaining on track for a second consecutive weekly decline as a stronger U.S. dollar, rising oil prices and elevated U.S. Treasury yields weighed on demand for the precious metal.

Markets are also awaiting the latest U.S. jobs data for indications about the strength of the American economy and the Federal Reserve’s next policy steps.

Investors are assessing whether prolonged tensions in the Middle East could push energy prices higher for longer and reignite inflationary pressures, potentially complicating the outlook for interest rates.

Although crude-oil flows in the region have largely recovered, attacks targeting tankers and energy infrastructure have kept traders focused on risks to global energy supplies.

The combination of a stronger dollar, higher energy prices and geopolitical uncertainty is keeping pressure on emerging-market currencies such as the rand as investors reassess risk and await fresh signals from the U.S. economy and Federal Reserve.