Rand sinks as US air strike in Iraq spurs sell-off

South Africa’s rand slumped against the US dollar on Friday, as investors dumped risky assets after a US air strike in Iraq killed a top Iranian military commander.

The move in the rand, which some investors use as a proxy for emerging market (EM) risk, was sharper than in other EM units because of strong rand gains in recent weeks, traders said.

 Read: EM assets fall after Soleimani killing 

By 1515 GMT the rand was 1% weaker than its previous close at 14.23 to the dollar, its softest level since December 24.

Other EM currencies like the Russian rouble and Turkish lira also fell on news that the US air strike had killed senior Iranian military official Qassem Soleimani, stoking tensions in the Middle East and sending the price of oil higher.

“It’s very thin liquidity here and the big move is really off of what’s happened in the Middle East,” said Jan Sluis-Cremer, a senior forex trader at Rand Merchant Bank. “It’s all being driven by these offshore events, we’ve seen very little going through here domestically.”

Wichard Cilliers, chief currency dealer at TreasuryOne, said: “The rand was one of the best-performing currencies beforehand, and that’s why its given back quite a bit of ground now.”

Government bonds also weakened, with the yield on the benchmark 2026 bond up 5 basis points to 8.26%.

Stocks on the local bourse were mixed.

The Johannesburg Stock Exchange’s Top-40 Index ended up 0.19% at 51 536 points, while the All-Share Index rose 0.16% to 57 810 points.

Consumer cyclicals and financial firms fell, but a higher spot gold price on the Middle East tensions boosted miners of the precious metal.

AngloGold Ashanti was among the biggest gainers, its shares rising around 5.8%.