Risk appetite leads to rand recovery
The rand has continued to strengthen and stood at R14.41 to the dollar on Tuesday morning.
This follows an announcement by the US Federal Reserve that it does not intend to raise interest rates.
The chief economist at Econometrix, Dr Azaar Jarmine, said this resulted in a 'risk appetite' leading to money flowing into emerging markets.
The rand benefits significantly from this as it is one of the most traded emerging market currencies.
"When sentiment towards emerging markets deteriorates, the rand tends to be hit harder than most others, conversely... when risk appetite tends to increase, the rand benefits proportionately more," Jarmine said.
Good, but not enough
Despite the strength of the rand, fuel prices are still expected to increase in May.
The Automobile Association on Monday said it predicts a drop in diesel prices, but also expects higher petrol prices.
Jarmine said a stronger rand is not enough, especially since Brent Crude Oil is now trading at around US$43 per barrel as opposed US$38 per barrel in March.
Economist.co.za's Mike Schussler, however, believes a drop in price of Brent crude is in the pipeline.
This after OPEC leaders failed to agree on cutting supply, while Iran has also indicated its intention to re-enter the market.
Jarmine disagrees. He said a further drop in prices would result in the closure of US shale oil operation. He said Iran's supply would, in turn, offset the falloff.
According to Jarmine, this is more likely to lead to more stable changes in oil prices.
Edited by Marius van der Walt