The escalating conflict in the Middle East has pushed oil prices sharply higher, with Brent crude trading around $96 a barrel, well above levels seen before the conflict intensified.
The rand has received a significant boost from Fitch Ratings’ decision to upgrade the country’s sovereign credit rating, but escalating tensions in the Middle East continue to cloud the outlook for the local currency.
The ratings agency on Friday upgraded South Africa’s long-term foreign and local currency credit ratings to BB from BB- on Friday, marking its first upgrade of the country in almost 21 years and signalling growing confidence in South Africa’s fiscal management and reform programme.
The announcement initially sparked a rally in the rand, with the currency strengthening to around R16.22 against the US dollar as investors welcomed the improved credit outlook, before it traded at R16.52 against the greenback on Monday afternoon.
However, the gains proved short-lived as renewed conflict between Israel and Iran reignited global risk aversion, pushing investors towards traditional safe-haven assets and placing renewed pressure on emerging market currencies, including the rand.