MARKET WRAP: Rand reverses losses as dollar sags despite stronger than expected US nonfarm payrolls

The rand reversed its losses on Friday afternoon as the dollar sagged despite a stronger-than-expected US nonfarm payrolls report.

The local currency firmed as much as 0.5% to R18.60/$, after weakening as much as 1.4% before the release of the closely watched US jobs report, suggesting that investors still think the Federal Reserve will start cutting interest rates in 2024.

The world’s largest economy created 216,000 jobs in December versus market expectation of 170,000. However, the jobs figures were downwardly revised for November and October respectively by some 70,000.

The rand is a proxy of investor sentiment towards emerging markets, which tend to benefit during bouts of global risk appetite.

At 6.35pm the rand was 0.16% higher at R18.6672/$, little changed at R20.4685/€ and 0.4% softer at R23.7827/£. The euro was 0.16% firmer at $1.0965.

The JSE reversed most of its losses, with all-share index relatively flat at 74,488.20 points, after starting the new year on a sour note.

The sector performances were patchy on Friday, having recovered significantly from earlier losses.

Retailers were some of the notable performers on the day, with Shoprite gaining 2% to R271.41 and Pepkor picking up 3.19% to R19.09.

Platinum group metals shares also featured prominently on the winners’ board, as did the construction counters, though the latter sector hardly moves the dial on the overall market.

Impala Platinum was up 4.6% to R83.89 and Anglo American Platinum gained 2.2% to R877.23.

“The first US jobs report of the year was an early reminder to investors that things don’t always go their way, despite the experience of the last couple of months,” said Craig Erlam, senior market analyst at Oanda in a note.

“Whether it was just exuberant festive cheer or something more, investors bounced into the end of 2023 full of hope that not only is the tightening cycle behind us, but 2024 will be the year of the soft landing and more rate cuts than you can count on one hand.”

The market’s indifference to the nonfarm payrolls report was also reflected in commodity markets where platinum rose just over 1% to $964.85oz.

Brent crude rallied 1.23% to $78.60 per barrel by 6pm.

Europe’s major stock markets also pared losses by late afternoon on Friday, with the UK’s FTSE 100 slipping 0.28% and France’s CAC 40 losing just 0.25%.

Earlier in the week, global markets wobbled after the release of the minutes of the Fed’s most recent meeting, which were interpreted as being hawkish — meaning in favour of continued tighter monetary policy.

“Today has, along with the [Fed] minutes on Wednesday, brought an early setback. But I don’t think either ultimately changes anything as far as the rest of the year is concerned. The US labour market is still slowing gradually and while wages were a little stronger, the broader trend remains very promising,” Erlam said.

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