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Cape Town – An almost 25% gain in the oil price this week has put a dent in the rand’s rally, with the local currency trading 0.21% down at R13.41/$ on Friday at 08:30.
“The oil rally is proving a hindrance for the rand,” said RMB analyst John Cairns. “Brent pushed through the psychological $50/bbl level overnight, for a gain of almost 25% in the past two weeks.”
“Oil gains can at times be good for the rand, like early this year when the market bounced off its post-crisis lows of US$27/bbl,” he said. “This time around, however, the oil rally is not a sign of better global economic conditions, but rather due to speculation that oil producers might cut back supply.
“The general oil producers' meeting on 27-28 September and the formal Opec meeting in late November are now key event risks to look out for.”
Umkhulu Consulting’s Adam Phillips said on Friday that “we could see a mild 'risk off' day today”, meaning the rand could lose more ground against the dollar.
Phillips sees the rand trading between R13.20 to R13.50 against the dollar on Friday and “possibly for the rest of next week”.
“Equity markets have been quiet overnight and unless they put in a good performance, I don't see a good reason for emerging market currencies appreciating today,” he said.
Cairns said the latest US Federal Reserve developments were not rand friendly - which was more significant than the oil price rally. “Two Fed hawks were at it again last night, hinting that a hike is justified in September,” said Cairns.
“Most of the rest of the Federal Open Market Committee seem to disagree, but the almost daily talk of hikes keeps the market nervous,” he said.
“The ECB (European Central Bank) has not helped either. The minutes of their last meeting, released last night, suggest that they are still some way from further easing.”
The rand was also trading 24 US cents lower at R15.20 against the euro and 0.16% down at R17.63 against the pound at 08:30.
