Rand raises hopes for fuel-price drop

The rand on Wednesday powered to its strongest against the dollar in 10 months, raising hopes that fuel prices would dip next month.

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Johannesburg - The rand yesterday powered to its strongest against the dollar in 10 months, raising hopes that consumer price inflation would slow and fuel prices would go down next month.

Buoyed by investors looking for yields in riskier assets and the US productivity numbers for April to June, the rand hit a new high of R13.3008 by 3pm before retreating to R13.3011 a dollar by 5.30pm.

Bureau for Economic Research economist Pieter Laubscher said the stronger rand was good for consumer price inflation, especially the transport sector. He said the performance of the rand would help lower income households.

“We have seen a petrol price drop recently,” Laubscher said. “There will be another petrol price drop in September.”

The higher rand comes on the back of stronger government bonds as investors seek higher yields in emerging markets, such as South Africa, on expectations of lower interest in emerging markets.

“At the moment it is not good for exporters who like weaker currencies. Mining will come under pressure although we have had good rand dollar prices for precious metals,” he said.

The local government elections helped boost the rand. Meanwhile, the dollar weakened on speculation the Federal Reserve would be slow to raise interest rates.

European stocks snapped a five-day winning streak and most Asian shares fell.

* With additional reporting by Reuters

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