Rand weakens sharply‚ setting scene for further fuel price rises

The rand was a lot weaker on Thursday morning‚ raising the prospect of yet another increase in fuel prices‚ which have been a political hot potato ahead of the general elections in 2019.

Consumers and businesses are already grappling with record fuel prices. Earlier in the week‚ the price of unleaded 93 petrol rose 99c‚ unleaded 95 rose R1 and diesel increased by R1.24. Illuminating paraffin now costs an additional R1.04 and liquefied petroleum gas rose R1.79.

The renewed weakness in the local currency comes at a time when international oil prices are at multiyear highs‚ reigniting inflation concerns.

The rand has suffered collateral damage from a strong dollar‚ which has drawn strength from rising US treasury yields‚ amid the probability of further US increase in interest rates.

The yield on the benchmark US 10-year paper rose to 3.21% on Wednesday‚ its highest in seven years‚ after upbeat economic data including a private-sector jobs report.

Oanda analyst Stephen Innes said the dollar was “on a rampage”‚ supported in part by several US Federal Reserve officials’ upbeat assessments of the US economy.

A weaker rand pushes up the cost of imports‚ such as fuel‚ though it benefits the tourism sector and exporters.

The rand has weakened just more than 2% against dollar over the past 24 hours‚ bringing losses for week so far to just shy of 4%.

Local bonds were not spared the sell-off‚ with the yield on the benchmark R186 pushing up to 9.22%‚ from 9.08% at the last settlement. Bond yields move inversely to prices.

Brent crude hovered just under $86 a barrel‚ levels last visited 2014‚ according the Iress data.

At 8.48am‚ the rand was at R14.7042 to the dollar from R14.6363‚ at R16.8868 to the euro from R16.7961 and at R19.0422 to the pound from R18.9397. The euro was at $1.1485 from $1.1475.