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Standard Bank Group
The SA Daily 23 April 2018

Oil and the rand

  • Since 2015, there has been a linear negative relationship between the oil price and the USDZAR. Over this period, common factors have had a significant influence on both these prices.
  • A higher oil price in the long run is negative for the rand from a trade balance perspective but, as long as it goes alongside a rise in other commodity prices, the impact is mitigated — and the rand typically strengthens as oil rises alongside other commodity prices.
  • We are still relatively bullish about the outlook for the rand, supported partly by relatively high export commodity prices supporting the terms of trade despite the rise in oil in recent months. At this stage, we forecast the rand around R12.50/$ by end-2018 and R12.70/$ by end-2019. The risks, particularly in the near term, are in our view biased to the stronger side of our forecasts.

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