The rand strengthened on Tuesday as the absence of any immediate escalation in tensions between Iran and the United States prompted investors to return to riskier assets.
The rand was trading at R14.34 to the dollar by 1452 GMT, 0.91% higher than its previous close.
“I think there has been a little bit of a rebound in risk assets just because global investors are scaling down their concerns over… the US and Iran,” said Lloyd Miller, an analyst at ETM.
Fears of a fresh conflict in the oil-rich Middle East have kept markets on edge following the killing of Tehran’s top general in a US drone strike last week.
Power cuts recently in South Africa due to problems at state-run utility Eskom, which supplies 90% of the country’s power, have also weighed on the rand.
Lloyd Miller, an analyst at ETM, said any further power cuts by Eskom or comments from its new CEO could drive future fluctuations.
Eskom has been struggling to keep the lights on amid severe financial strain and ailing infrastructure.
Reliant on bailouts to survive, it is widely perceived as the biggest risk to South Africa’s sluggish economy and a huge challenge for President Cyril Ramaphosa and his bid to revive growth.
South African shares also gained on Tuesday, with many rebounding from losses at the start of the week, but gold stocks fell back. They had risen over the previous two trading days as investors retreated to safe haven assets amid fears over the situation in the Middle East.
The Johannesburg Stock Exchange’s All-Share index closed 0.33% higher at 57,384 points, while the top 40 index also rose 0.3% to 51,154 points.
The biggest winners of the day on the blue-chip index were financial firms like Investec, FirstRand and Sanlam, which benefit from a stronger rand and rose 0.59%, 0.58% and 0.56% respectively.
Gold stocks featured at the bottom of the index, with AngloGold Ashanti falling 3.8%, Goldfields shedding 2.53% and Anglo American Platinum slipping 1.28%.
In fixed income, the yield on the benchmark government bond due in 2026 was up 1 basis point at 8.260%.