MARKETS WRAP: Rand pares weekly gain as US jobs number boost dollar
The rand weakened on Friday, paring its weekly advance, after a report showed US jobs growth exceeded estimates, thereby creating more room for the Federal Reserve to begin raising interest rates to curb inflation without worrying about derailing the economic recovery.
SA’s currency slipped 1.4% to R15.4777/$ as of 5.15pm local time, paring its weekly advance to just 0.8%, after non-farm payrolls data showed the US economy added 467,000 jobs in January and an upwardly revised 510,000 in December. While the report also showed the US unemployment rose slightly to 4%, average hourly earnings also rose, resulting in an advance in the dollar and a rise in Treasury yields.
“We had some strong non-farm payroll numbers out of the US…so I suspect the rand might be giving a bit back today as that number was very bullish for the dollar,” said Nick Kunze, a portfolio manager at Sanlam Private Wealth.
The fact that US jobs numbers far exceeded the median estimate of economists polled by Bloomberg of 125,000 new jobs, underscores statements by Fed chair Jerome Powell who last week indicated the economy is strong enough to begin withdrawing monetary support. With US inflation accelerating at the fastest pace in four decades, banks have forecast four 25-basis point rate hikes in the US in 2022.
“The rand is highly volatile, and particularly sensitive to US data releases which support a March hike in the Fed funds target rate,” said Investec economist Anabel Bishop. “Today’s substantially better than expected US jobs data consequently caused the domestic currency to weaken somewhat in reaction.”
Though the rand weakened on Friday it is still among the best performing emerging market currencies against the dollar this year, having advanced 3% against the greenback so far.
The JSE all-share index closed 0.25% higher at 75,206, extending its rise in the past five trading sessions to 2.4%, its first weekly advance in three. That kept the index within about 1,000 points of its all-time high of 76,233.26 reached on January 20.
Gains on the JSE were led by PSG Konsult, which rallied 6.8% to R15, and resources counter Kumba Iron Ore, which jumped 5.8% to R600.66.
Coal miner Thungela Resources rose 3.2% to R101.15 while Northam Platinum advanced 3.1% to R202. Harmony rose 2.7% to R55.70 while Sasol climbed 2.9% to R350.28.
“Commodities tend to benefit from higher inflation environments,” said Kunze.
Source: businesslive.co.za