JOHANNESBURG (Reuters) -South Africa’s rand slipped against a stronger dollar on Monday as markets looked towards a U.S. policy decision later this week, while concerns grew over a possible escalation in conflict in the Middle East.
At 1542 GMT, the rand traded at 18.48 against the dollar, about 1% weaker than its previous close. The dollar last traded around 0.2% stronger against a basket of global currencies.
“The start of the week has brought new concerns, with geopolitical tensions again at the forefront,” said Wichard Cilliers, head of market risk at TreasuryONE.
The likelihood of widening conflict in the Middle East has weighed on sentiment, after the U.S. and Israel blamed a rocket strike in the Israeli-occupied Golan Heights on the Iran-backed Lebanese militant group Hezbollah.
“Israel, considering an attack in Lebanon, is fuelling the safe-haven U.S. dollar,” Cilliers said.
“The market will only get more volatile as the week progresses with significant data releases and events,” Cilliers added.
Investors will turn their attention to the U.S. Federal Reserve later this week for insights into the future interest rate path of the world’s biggest economy.
The Fed is expected to keep interest rates unchanged on Wednesday, but markets are betting on a cut at the following meeting in September.
Like other risk-sensitive currencies, the rand often takes cues from global drivers like U.S. monetary policy and geopolitical tensions in addition to local factors.
On the Johannesburg Stock Exchange, the Top-40 index closed over 0.2% weaker.
South Africa’s benchmark 2030 government bond was weaker, with the yield up 2.8 basis points to 9.505%.
(Reporting by Tannur Anders and Bhargav Acharya; Editing by David Holmes, William Maclean)
