The rand firmed on Wednesday, while the JSE gained amid global peers as investors kept a close eye on developments in the Middle East.
Markets were attempting to pick up on the September rally after news that Iran launched about 200 missiles at Israel overnight on Tuesday weighed on sentiment.
The attack, “Operation True Promise 2”, was reportedly in response to the assassinations of top Hezbollah leaders. Hezbollah is a Lebanese Islamist political and militant organisation, supported by Iran and Syria.
According to reports on Wednesday, though Iranian missiles caused minimal damage, the attack marked a big escalation in the conflict between Israel and Iran.
Kelvin Wong, senior market analyst at Oanda, said geopolitical risk premiums in the Middle East might trigger a further rise in hostilities, “with the possibility of more stakeholders such as the US and Russia being drawn into the war”.
TreasuryOne currency strategist Andre Cilliers said the rand had retreated from its recent highs due to “risk aversion after the Middle East conflict”, with stronger dollar performance driven by resilient US labour data.
“However, the long-term outlook for the rand remains positive [due to] expected rate cuts [by the Federal Reserve],” Cilliers said.
At 6.27m, the rand had firmed 0.3% to R17.3329/$, 0.63% to R19.1554/€ and 0.33% to R23.0134/£. The euro was 0.16% weaker at $1.105.
Data released earlier showed the US private sector hiring picked up in September, indicating the labour market is holding its ground despite some signs of weakness, reported Bloomberg.
The data follows a report released on Tuesday showing the US job openings surprisingly increased more than expected in August, signalling resilience in the US labour market.
The jobs reports are driving the narrative that while the labour market is cooling, it is not rapidly slowing, reported Bloomberg.
Investec chief economist Annabel Bishop said the labour data weighed against expectations for the Fed to implement another 50 basis point (bps) rate cut in November, “with the probability implied by interest rate futures for a 25bp Fed rate cut rising after the US jobs openings data release”.
Investors are now awaiting the September US nonfarm payrolls report, which is set to be released on Friday and is likely to be a key driver for markets this week.
Before the report, market participants will receive the initial jobless claims on Thursday.
The JSE all share gained 0.57% to 87,115 points, with major indices mixed, while the top 40 added 0.7%.
At 6.35pm, the Dow Jones industrial average was 0.1% weaker at 42,116 points, while markets were mixed in Europe.
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