Rand eyes R17/$ on oil rout

Cape Town - The rand was on the back foot on Wednesday ahead of inflation data due at 10:00 and as the oil turmoil continued on renewed oversupply fears.

The local unit managed to move just below R16.60 against the greenback and was trading in the R16.60s for most of Tuesday before sliding quickly after the SA close for an overnight close of R16.78.

By 07:58 on Wednesday the unit was back at its lowest levels for the week, trading at R16.88/$, R23.86/£ and R18.47/€.

So far this year the rand has lost 9% of its value against the dollar.

Adam Phillips, independent treasury specialist to corporates at Umkhulu Consulting, said in his morning note on Wednesday that once again the yen and the euro are back in favour as the oil price was hit by comments from the International Energy Agency stating that the oversupply of oil is here to stay.

"The US equity markets were slightly up, but Far Eastern markets are down heavily as crude oil prices hit a 13-year low. Clearly Opec now needs to re-assess given that the Iranians are now back in the frame."

The inflation rate is expected to move up to 5.2% from 4.8%, while the market sees a slowdown in retail sales, due at 13:00, to 2.9% from 3.3%.

"With both Antipodean currencies lower on the back of poor Far Eastern equity markets the ZAR has followed suit, although most of the fall was seen last night in New York with little follow through in the Far East. This maybe because gold is very steady, although other metals continue to move lower," said Phillips.

He expects the local unit to show some resistance if the currency was to move nearer to R17.00/$.

In other currency markets, the British pound also touched a short-term low as UK governor Mark Carney said he could not set a timetable for raising rates and that a slowing Chinese economy will not help the currency.

The US dollar might get some relief from inflation data coming out later with operators also looking closely at housing and construction data, said Phillips.

The yuan has kept steady after the central bank set a slightly stronger mid rate, "so it is all down to the oil price".

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