The South African Rand was holding in proximity to a fresh 3 1/2-year high of 16.1255 per US Dollar on Thursday, as geopolitical tensions eased to some extent after US President Donald Trump backed away from threats to impose tariffs as leverage to take control of Greenland, which supported risk-sensitive currencies.
Trump also ruled out the use of force to annex the Arctic island and said a “framework of a future deal” over Greenland had been agreed.
Meanwhile, Denmark said it would not begin negotiations to cede its territory to the US, while the European Parliament suspended approval of the EU-US trade deal from last July in opposition to Trump’s threats.
The Rand has also drawn support from Gold, which scaled a new all-time high earlier this week amid Trump’s stand-off with the EU.
“The Rand’s rally was fueled by a combination of safe haven demand for gold which surged toward $4,824 per ounce due to ongoing concerns over U.S. Federal Reserve independence, and domestic data showing December inflation held steady at 3.6%, supporting hopes for a balanced interest rate path,” Umkhulu Treasury said in a research note, cited by Reuters.
Investor focus now sets on November’s US Personal Consumption Expenditures data, the Federal Reserve’s preferred inflation measure, for more clues on monetary policy path.
The final estimate of US GDP growth for Q3 and the weekly report on jobless claims will also be closely examined.
Investors are currently expecting at least two rate cuts by the Fed this year, starting as early as June.
The USD/ZAR currency pair was last down 0.21% on the day to trade at 16.2157.
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