JOHANNESBURG: The South African rand weakened slightly against a stable dollar in early trade on Wednesday, as markets worried about rising tensions in the Middle East.

At 0803 GMT, the rand traded at 17.3975 against the dollar, about 0.1% softer than its previous close.

The dollar held onto its sharpest gains in a week on Wednesday after an Iranian missile attack on Israel on Tuesday rattled investors over the widening of conflict in the Middle East.

“The ZAR has retreated from its recent highs due to risk aversion following the Middle East conflict, along with stronger USD performance driven by resilient US labour data,” said Andre Cilliers, currency strategist at TreasuryONE.

South African rand holds on to gains against dollar

“However, the long-term outlook for the ZAR remains positive with expected rate cuts,” Cilliers added. Like other risk-sensitive currencies, the rand often takes cues from global drivers, like rising geo-political tension, in the absence of major local factors.

On the Johannesburg Stock Exchange, the blue-chip Top-40 index traded about 1.2% up in early trade.

South Africa’s benchmark 2030 government bond was weaker in early deals, as the yield gained 19.7 basis points to 9.162%.