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Rand weaker as risk appetite ebbs

The rand weakened in early trade on Monday as an attack on Saudi Arabia’s oil facilities dented risk appetite, while investors braced for monetary policy decisions from major central bank meetings due this week.

Picture: EWN

JOHANNESBURG - The rand weakened in early trade on Monday as an attack on Saudi Arabia’s oil facilities dented risk appetite, while investors braced for monetary policy decisions from major central bank meetings due this week.

At 0635 GMT, the rand traded 0.53% weaker at R14.6575 per dollar.

The rand, along with other emerging market assets, last week benefited from increased risk appetite after Washington and Beijing officials made concessions on retaliatory tariffs, while the European Central Bank (ECB) cut interest rates and promised more stimulus.

However, the risk-on mood soured somewhat after an attack on Saudi Arabian refining facilities that disrupted global oil supply and heightened Middle East tensions.

“This attack and any retaliation will keep markets volatile and could result in risk-off trading conditions, which would result in weakness for EM currencies and equity markets,” RMB analyst Siobhan Redford said in a note.

Beyond that, currency markets are awaiting the outcome of several major central bank meetings, including the US Federal Reserve and the South African Reserve Bank (SARB).

“This week, we have various central bank events; the primary focus will be on the outcome of the FOMC on Wednesday, followed by the SARB on Thursday, as global tensions have risen as a result of the events in Saudi Arabia,” Nedbank analysts said in a note.

Bonds also weakened, with the yield on the benchmark instrument due in 2026 adding 10.5 basis points to 8.245%.

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