Rand falls as risk appetite wanes

South Africa‘s rand fell early on Tuesday, as appetite for riskier assets faltered after Russia ordered troops into two breakaway regions in eastern Ukraine in a dramatic escalation of a crisis that the West fears could unleash a major war.

At 0655 GMT, the rand traded at R15.18 against the dollar, 0.41% weaker than its previous close.

Russian President Vladimir Putin recognised two breakaway regions in eastern Ukraine as independent on Monday and ordered the Russian Army to launch what Moscow called a peacekeeping operation into the area.

But traders said a rise in commodity prices such as gold, which benefits the resource-rich South Africa, could limit sentiment-driven selling in the rand.

“The markets are so wishy-washy at the moment due to the massive uncertainty in various sectors of the world’s political and economic spheres. It’s becoming really hard to run even short-term risk at the moment given the higher intra-day volatility,” Warrick Butler, chief trader at Standard Bank, wrote in a note.

“The high commodities prices are helping the supply of dollars into (South Africa) but we still get these occasions where disinvestment/hedging takes place from an offshore investor.”

The yield on the benchmark 2030 government bond added 5.5 basis points to 9.175%, reflecting weaker prices.