The rand dipped below the R6 to the dollar level after noon on Wednesday, spelling more trouble for exporters while giving consumers cause to smile, economists said.
While the stronger currency could bring interest-rate cuts, lower petrol prices and a reduction in the price of consumer goods, exporters will find it difficult to stay competitive, Nedcor senior economist Magan Mistry said on Wednesday.
Oil prices are easing due to increased supply and levelling demand. This will result in a ”substantial reduction” in the petrol price in December, he said.
The short-term prospects of the rand getting stronger are ”quite significant” because the dollar is likely to get weaker.
The rand has benefited from a weaker dollar and is likely to remain weak due to structural weaknesses in the United States economy, Mistry said.
Others are even more upbeat.
”Consumers are having the party of their lives. We’re in a sweet spot now,” said T-Sec chief economist Mike Schussler.
He noted that this is the rand’s 35th month of strength. There is a 70% chance that the rand will stay at this level.
The stronger rand is positive news for the inflation rate and for further interest-rate cuts. The chances of a cut as soon as December rather than in February next year are also greater, Mistry said.
Sale volumes of durable consumer goods such as cars and furniture are up ”quite heavily”.
Economic consultant Nico Czypionka pointed out that while prices of domestic appliances and electronic goods have fallen, car prices have not seen a reduction because they are being ”manipulated by local assemblers or manufacturers”.
If the rand stays below the R6-to-the-dollar level, it could spell the end for some manufacturing branches.
While consumers have greatly benefited from the stronger currency, employees of exporting companies are at greater risk of losing their jobs, Czypionka said.
In July, the rand traded below R6 for the first time since October 1999. — Sapa