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The rand has seen some relative stability this month, averaging R16.40/USD, and near this rate currently, with markets awaiting progress on the peace deal, held together by the memorandum of understanding (MOU) as negotiations proceed.
The oil price averaged US$66.8/bbl over January and most of February this year, jumping to US$72.8/bbl on the onset of the war in the Middle East, then rising well above this, but now still above the pre-war levels.
That is, the Brent crude oil price has reached the level it jumped to on the first day of the Middle East war, but is expected to fall further, below US70/bbl to pre-war levels, although there will likely be some volatility as the peace deal is ironed out.
Sizeable petrol price cuts continue to build, as they are calculated on the previous month’s international petroleum product prices, which are priced in rands, and so the rand dollar exchange rate is key for the pricing.
The domestic currency has been calm ahead of the planned protests against illegal (undocumented) immigrants, with President Ramaphosa highlighting “(t)he right to protest is enshrined in our Constitution. Protest is both a right and a responsibility”.
In particular, “(t)hose who intend to protest should do so peacefully, lawfully and with respect for the rights, dignity and safety of others. Achieving a legitimate end does not justify unlawful means.”
“Where there is criminal conduct, those responsible will be held accountable and the law will take its course. We must reject the idea that acts of violence or intimidation are justified on the basis of a grievance, (or) for political reasons”.
The US dollar has dipped over the past week, losing ground on progress in the Middle East (as a safe haven investment channel), while expectations of US interest rate hikes have dimmed somewhat, supporting the domestic currency.
The rand can make further gains this week, with tomorrow’s planned protests not expected to prove disruptive to SA’s financial markets or economy, and global events the typical driver of the rand, with US rate hike expectations likely to fade further.
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About the author
Annabel Bishop, Chief Economist, Investec Bank Limited South Africa
Annabel Bishop joined Investec in 2001 and is the Chief Economist. She has worked in the macroeconomic, econometric, risk, financial markets, political risk, public finance and regulatory, among other, fields for around 25 years. Annabel is the holder of the Sake/Beeld Economist of the Year award for 2010 and has won numerous monthly Reuters Econometer awards, and various Focus Economics (Economic Forecasts from the World’s Leading Economists) categories for correctly forecasting a range of economic variables. She has authored a wide range of in-house and external articles, published both abroad and in South Africa. She has also guest lectured at Gibbs, the University of Pretoria, Wits, UJ and other academic institutions, and has presented at various national and international conferences. Author of the “Financial Services sector and its support to the economy“ section in the Better Choices Ensuring SA’s Future.
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