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Rand reaches R14.70/$ following US jobs data


The rand remained weaker against the dollar on Friday afternoon, with US jobs numbers for July in line with expectations.

US employers added 164,000 staff to their payrolls in July, only slightly less than the 165,000 expected in the Bloomberg consensus, although figures for the prior two months were revised downwards. Average hourly earnings surprised to the upside, growing 0.3% month-on-month, compared to the 0.2% expected by the market.

US economic growth is being closely watched as investors try to determine how much further US interest rates are set to fall. Lower interest rates in the US will help support global growth as well as investor interest in local bonds, thus offering additional space for the Reserve Bank to make further cuts to the repo rate.

At 2.45pm, the rand had lost 0.24% to R14.6951/$, 0.25% to R16.2918/€, and 0.17% to R17.8135/£. The euro was virtually unchanged at $1.1085. Measured against the dollar, the rand was roughly where it was before the report was released, having initially firmed about 5c.

US jobs numbers were the main event watched on Friday, although investor jitters continue after US President Donald Trump ratcheted up tension in the US-China trade war.

On Wednesday, Trump threatened to impose an additional 10% tariff on $300bn worth of Chinese goods on September 1, while Beijing has threatened counter-measures.

Foreigners offloaded R4bn worth of local bonds on Thursday, although they recovered slightly on Friday. At 2.45pm, the benchmark R186 government bond had strengthened, with its yield 1.5 points lower at 8.35%. Bond yields move inversely to bond prices.

Volatility in the rand had also picked up, with the implied one-week reading at 15% according to Bloomberg data — a one-month high. Analysts attributed this to the ease at which global investors can trade in the rand, which helps make it a proxy for emerging-market sentiment.

“As the global economy heads ever closer to the end of the current business cycle, investors should expect rand implied-volatility levels to gradually pick up to reflect the increased risk premium that is actively being priced into SA markets,” said Mercato Financial Services analyst Nico Du Plessis in a note.

There is also an expectation that emerging markets will come under considerable pressure.


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