The rand gained in strength on Wednesday against global currencies and has continued to build on a strong week and more good news is on the horizon as South African motorists can expect more petrol price cuts.
The ZAR made some major gains against global currencies on Monday and broke through the R17.60 mark against the dollar to reach its best level since July 2023.
The rand showed more resilience on Wednesday morning as was trading at around R17.24 against the dollar at 9:30am.
When compared to other global currencies, the rand faired well and was trading at around R19.31 against the euro.
The ZAR was trading at around R23.11 against the pound.
Andre Cilliers, currency strategist at TreasuryONE told Reuters earlier this week that the rand will be below the R18 mark this week.
“The rand is likely to remain within a R17.40 to R17.70 range in the short term as it tracks international moves but we could see further profit-taking, given the rand's recent strong run,” Cilliers noted.
Petrol price to drop
With the rand becoming more firm, South Africans can expect more petrol price cuts, according to Old Mutual Wealth Investment Strategist, Izak Odendaal.
“While petrol inflation was still positive in the August CPI report at 1.7% year-on-year, the October report will reflect two more rounds of fuel price cuts, taking petrol inflation down to around -20% year-on-year,” he explained
“Since petrol is 5% of the overall basket, this will subtract around one percentage point from overall inflation, which was at a three-year low of 4.4% in August.”
Will this impact the interest rate?
Odendaal said that the South African Reserve Bank (SARB) will not cut rates directly in response to oil price declines, since central banks typically look through the “first round” effects of energy price changes.
“What they care about is the second round effects, how those price changes ripple through the economy and how firms pass on (or not) the higher or lower input costs to consumers. This is why core inflation, which excludes volatile food and fuel prices, is a useful measure. It fell to 4.1% in August.”
He concluded that the Reserve Bank expects core inflation to average 4.1% next year and 4.3% in 2026.
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