JSE could head lower as rand remains strong

The rand held steady at the three-month high against the dollar on Friday morning despite the threat of a military conflict between Russia and Ukraine that has cast a shadow on global markets.

The SA currency has traditionally tended to overshoot to the downside during bouts of uncertainty, but has remained relatively resilient this time around.

The rand changed hands at R14.97/$, having gained 6% since the start of 2022, making it the best performing currency among the major emerging markets, behind Brazil.

The resurgent commodity prices, particularly platinum group metals, have partially shielded the rand that is considered a proxy of sentiment towards emerging markets because of its highly liquid status.

The JSE, which has been equally resilient in the face of market angst about geopolitics in the Black Sea region, is likely to trade lower on Friday morning given the weakness in the Asian equity markets.

International oil prices were moderately lower in early dealings, with Brent crude shedding 0.45% to $92.42 a barrel as investors anxiously await how geopolitics play out.

However, the gold price, which has safe-haven characteristics, slipped 0.37% to $1,891.34/oz, but is 5% up since the start of the month.

World leaders are scrambling to find a diplomatic solution to the crisis, which potentially could have a destabilising effect on the global economy, amid a recovery from the ravages of Covid-19 pandemic.

The US secretary of state and Russia’s foreign minister are reportedly scheduled to meet next week to diffuse the Ukraine tension. 

Russia and Ukraine together account for about 25% of global wheat exports. In addition, Russia accounts for about 8% of global oil exports.

mahlangua@businesslive.co.za