Rand edges up after Iran-US fears abate

South Africa’s rand regained ground against the dollar in late trade on Wednesday, as fears of an immediate escalation in a conflict between the United States and Iran receded and markets rolled back an earlier sell-off.

Read: A wild night for global markets leaves the bulls back in control

Stocks, however, didn’t return to positive territory after investors moved to ditch risky assets following Iranian missile strikes on bases hosting US troops in retaliation for the killing of Tehran’s top general.

By 1435 GMT, the rand traded at 14.2370 per dollar, 0.54% stronger than its previous close.

Jacques Nel, head of Africa Macro at NKC African Economics said dovish statements from Iran following the strike and an uncharacteristically calm response from the United States had prompted a correction to the major sell-off seen earlier on Wednesday.

“The only major development on the local front would have been the PMI release, which, while still weak, would not have disappointed as expectations would not have been too positive,” Nel added.

South Africa’s seasonally-adjusted Absa Purchasing Managers’ Index (PMI), published on Wednesday, fell deeper into a contraction in December, following a slump in new sales orders and business activity due to power cuts.

Problems at state-run power utility Eskom, which generates more than 90% of South Africa’s power, have left it struggling to keep the lights on. It is widely viewed as the biggest risk to South Africa’s already flagging economy.

Eskom said it may have to implement overnight power cuts for the second consecutive night on Wednesday, a scenario which would likely weigh on the rand. Developments in the situation at Eskom are expected to be a key driver in the coming weeks.

The Johannesburg Stock Exchange’s Top-40 index closed 0.12% lower at 51 090 points, while the broader all-share index lost 0.11% to 57 322 points.

This followed a trend in stock markets around the world as investors waited for a statement on Iran by US President Donald Trump, due at 1600 GMT on Wednesday.

Some stocks benefitted from the tensions, however. Gold producers like Anglo American Platinum and Sibanye-Stillwater rose as investors flocked to safe haven assets.

In fixed income, the yield on the benchmark government bond due in 2026 was down 1.5 basis points to 8.25%.