The rand strengthened to R16.22 early on Friday morning, and although it slipped by a few cents, it was still much stronger than on Thursday.

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The rand strengthened by about 2% on Friday after US President Donald Trump cancelled planned strikes on Iran, saying that a peace deal could be signed this weekend.

This could potentially open the Strait of Hormuz to shipping, but Reuters reports some analysts are sceptical.

Iran has not yet approved any agreement, and Israel was not a party to the memorandum of understanding.

Iran’s semi-official news agency, Mehr, said on Friday the memorandum containing US commitments to lift sanctions and its naval blockade, “required finalisation by the relevant authorities”.

From a weak point of R16.56 on Thursday, the rand reached R16.22/$ early on Friday morning, a level last seen at the start of the month. By midday, it was trading at R16.28.

Brent crude oil dropped below $90 per barrel for the first time since 9 March, and it has now declined almost 7% for the week.

The gold price firmed to about $4 223 per ounce, while still down almost 2.5% for the week.

Nedbank economists believe the rand could strengthen to R16.15 per dollar on Friday, with a range of up to R16.45.

“Time will tell, but if the US version of events is true, then we expect JD Vance to travel to the Middle East as soon as this weekend – but once again, we have heard it all before,” notes Nedbank.

Earlier this week, Trump had threatened to confiscate Iran’s strategically important Kharg Island.

The lower oil price, combined with the stronger rand, could add to expected diesel and petrol price cuts in July. Lower fuel prices could, in turn, temper inflation going forward.

READ | Fuel prices on course to drop in July – even though levy will be back to normal

However, a surge in inflation to about 4.7% is expected when Statistics SA releases the May number on Wednesday, taking inflation beyond the tolerance band of one percentage point above the 3% target. Inflation already rose to 4% in April.