By the close of trading on Tuesday, the South African rand weakened against the US dollar.

  • The greenback gained ground, after the ISM non-manufacturing PMI rose to a four-month high in December, on account of a partial trade agreement between the US and China.
  • IRAN’S revolutionary guards corps says it has fired “tens of missiles” at US targets.  The strikes raise fears of a wider conflict as well as oil disruption.  President Trump will not deliver a scheduled address following a missile attack on two Iraqi bases that house US troops.
  • Gold and the Japanese yen saw heavy demand as safe haven assets after it was reported early morning that Iran had attacked a couple of US bases in Iraq. Equities tumbled and the US dollar rose as investors sought safe havens in US Treasuries as well. The US 10-year yield slid almost 7 bps to 1.75%, the lowest since December 3. Gold prices surged to the highest since March 2013, rising above the 61.8% Fibonacci retracement level of the September 2011 to December 2015 drop at 1,594.08. USD/JPY fell to the lowest in three months amid yen demand
  • Further, trade deficit narrowed to a three-year low in November, marking its third decline in four months.
  • Durable goods order declined in November, pulled down by steep declines in demand for machinery and transportation equipment, indicating a sustained weakness in the manufacturing sector.
  • The yield on benchmark government bonds ended mixed yesterday. The yield on 2020 bond declined to 6.76% while that for the longer-dated 2026 issue rose to 8.26%.

In early trade on Wednesday, the US dollar is trading 0.1% higher against the South African rand at R14.3261, while the euro is trading 0.1% higher at R15.9809.  The British pound has gained 0.2% against the South African rand to trade at R18.8125.

On Tuesday, the euro declined against most of the major currencies.

  • In the eurozone, consumer price index (CPI) rose in line with market expectations on an annual basis in December, due to rise in energy and unprocessed food prices.
  • Further, retail sales rose more than expected on an annual basis in November.
  • In the UK, news reports indicated that Britain’s emergency preparations for a no-deal Brexit have been halted “with immediate effect” as the UK Prime Minister, Boris Johnson’s deal to leave the European Union is expected to be approved by lawmakers later this week.

In early trade on Wednesday, the euro has marginally advanced against the US dollar to trade at $1.1154, while it has marginally weakened against the British pound to trade at GBP0.8495.