The rand is under pressure against the United States dollar, as rising oil prices and greater uncertainty in world markets place new strain on the South African currency.
The rand traded around R16,30 against the dollar on Tuesday, after weakening by roughly 1,1% on Monday. According to BusinessTech the pressure is attributed among other factors to new disruptions in oil supply in the Middle East and investors' focus on the United States Federal Reserve's interest rate decision later that week.
The weaker rand comes at a bad time for South African motorists, as the oil price has risen at the same time. Oil traded near $108 per barrel on Monday. South Africa is a net oil importer, which means that a higher oil price and a weaker rand could increase fuel costs. According to the latest data from the Central Energy Fund (CEF), there is currently an under-recovery of roughly R2,29 per litre for 95-octane petrol. If this level is maintained until the end of the pricing period, it could mean a 95-octane petrol price of around R29,21 per litre in October, compared to the current September price of R26,92.
The latest CEF figures also point to further pressure on diesel prices. The under-recovery for diesel is currently between R1,87 and R2,22 per litre, depending on the grade. When the rand weakens, oil purchased in United States dollars costs more in rand terms.
The latest development also follows a warning from the South African Reserve Bank that South Africa's reliance on imported refined petroleum products exposes the country more to global price shocks and volatility in the rand. More than half of South Africa's domestic fuel needs are currently supplied by imported refined products. Markets are meanwhile focused on the United States Federal Reserve's upcoming interest rate decision, which affects investor sentiment towards emerging markets, including South Africa. For South African consumers, the weaker rand and higher oil prices mean further pressure on fuel prices and ultimately the cost of transport and other goods.
The CEF data is the key source for the possible October fuel price. The R29,21 is a current under-recovery-based projection and not the final petrol pump price.
Sources: BusinessTech, Moneyweb
This article is an automatic English translation of a Nuusflits article originally published in Afrikaans. Read the Afrikaans original.
