MARKET WRAP: Rand hits four-month low as market focuses on US jobs
The rand weakened to its worst level in four months on Thursday, while the JSE pared gains with investors’ focus on the US jobs market.
The local currency weakened more than 1.3% to an intraday worst of R19.63 against the dollar — the weakest level since June 2. The currency’s short-term weakness accelerated after US data pointed to a strong jobs market ahead of Friday’s monthly print, said IG senior market analyst Shaun Murison.
Weekly initial jobless claims came in at 207,000 for the week ending September 30, a slight increase from the week before but less than the 210,000 markets expected.
“The rand has been on the back foot for most of the day. However, the rise in the dollar’s value can be attributed to indicators of a tightening labour market in the US,” said Murison.
That the number of individuals filing for unemployment benefits last week was fewer than predicted “is indicative of tighter wage inflation, which suggests a more hawkish stance by the Federal Reserve [Fed]”, Murison added.
Investors are, however, looking ahead to the nonfarm payroll data for September, due on Friday, as a more reliable indicator for the job market. Bloomberg reported that nonfarm payrolls will show a 170,000 increase.
While investors are not hoping for a recession, they are wishing for some labour market weakness that would cause the Fed to rethink raising rates again and halt the run in treasury yields to 16-year highs, Bloomberg reported.
“This data is considered to be a key indicator of the health of the US economy and can have a significant impact on the financial markets,” Murison said.
“If the data shows a higher-than-expected increase in employment, it could signal a stronger US economy. This could potentially lead to a surge in the dollar, which in turn could put further pressure on the rand,” Murison said.
“On the other hand, if the data shows a lower-than-expected increase, it could signal a weaker US economy, which could potentially lead to a decrease in the dollar and provide some relief to the rand.”
At 5.52pm, the rand had weakened 1.12% to R19.5515/$, 1.39% to R20.5835/€ and 1.47% to R23.7877/£. The euro was 0.22% firmer at $1.0528.
The JSE gained 0.97% to 71,249 points, having firmed more than 1% in intraday trading. The top 40 added 1.02%. Major indices were firmer on the day, with the exception of retailers and SA listed property.
Source: businesslive.co.za