Smoke billows from a site targeted by Israeli shelling in the southern Lebanese border village of Khiam on July 30, 2024, amid ongoing cross-border clashes between Israeli troops and Hezbollah fighters. Photo: AFP
By Nicola Mawson
THE local currency is holding its own while the JSE ended the day higher, despite current geopolitical tensions between Lebanon and Israel, with Israel firing back at Lebanon’s capital, Beirut, following an attack against the Holy Land over the weekend.
WTI crude futures soared as much as 4% yesterday to $76.80 (R1 398) a barrel, amid lingering concerns about potential supply disruptions as tensions in the Middle East mount, according to Trading Economics.
Hamas leader Ismail Haniyeh was assassinated in Tehran early yesterday following Israel's claim of killing Hezbollah's top commander in a Beirut airstrike on Tuesday in response to a weekend attack on the Golan Heights.
The JSE all share closed 1.93% higher at 82 765 points.
Petrochemical firm Sasol’s share price rose 2.37% to close at R147.35 on the JSE.
The rand has been trading in the R18 to R19 to the dollar range since the beginning of this month, apart from a brief mid-month dip below the R18 level.
The rand was at 0.72% higher at R18.1837 against the dollar at 6.50pm.
Economists agreed that for now Middle East tensions would not affect the rand, unless the issue escalates into a full-blown war. Instead, issues such as the US Federal Reserve’s sentiment around interest rates and local, positive, fundamentals were behind the currency’s current level.
Andre Botha, the head of Execution Dealing at TreasuryONE, said there was a bit of risk-off moves in the rand earlier in the week, when the first rumblings were heard about new geopolitical tensions. “Normally, these headlines only serve up knee-jerk reactions and the losses usually are not sustained as the dust settles,” he said.
Botha added that, when considering the greater economic picture, the latest geopolitical tensions need to be seen in the wider scope of events as well as data out of the US and Eurozone, and at the moment, the presidential race in the US.
“US economic figures and the Fed are more long-term determinants of where the emerging market currencies will move to,” he said.
South Africa had relatively little trade relations with Lebanon, and sentiment towards South Africa and, more generally, towards emerging markets in this context had been limited, Nolan Wapenaar, Co-Chief Investment Officer at Anchor Capital, told Business Report.
“Lebanon is relatively small in the context of emerging market destinations and therefore markets aren’t reacting. Unless we see significant escalation, it’s unlikely that this will have a major impact,” said Wapenaar.
Old Mutual chief economist, Johan Els, said he did not see any potential reaction by the local currency based on the Middle East war now extending to Lebanon, unless there was a significant escalation.
At the same time, Els was optimistic about South Africa, noting that risk had eased on the back of the Government of National Unity and there were hopes of improved economic growth. “So, all of that, less political risk, better growth, will, and has already started to help the rand,” he said.
Investec chief economist, Annabel Bishop, said in a note earlier this week that the rand was potentially facing a more optimistic outlook, given that the second quarter of the year had had positive developments that eroded the country’s political risk, as well as establishing a platform for stronger growth, and so better investor sentiment.
“The downside risks have fallen substantially as the new government was successfully formed and translated into executive positions, with expected improved governance,” she said.
Bishop noted that expectations of a local interest rate cut, widely expected on September 19, generally lead to a weaker rand. “The rand likely would see marked strength on a delay for rate cuts in South Africa,” she said.
BUSINESS REPORT