Rand starts the week on stable footing

The rand began the week on a stable footing, dipping to R14.89 against the dollar as traders started digesting the latest disappointing US jobs figures and the expected end of the bond buyback programme.

Data on Friday showed that the US jobs market showed its slowest pace of recovery in September, dragged down by the Delta Covid-19 variant.

The US only added a paltry 194 000 jobs in September, well below the market’s expectations of 500 000 on the payroll system, with the unemployment rate dropping to 4.8 percent from 5.1 percent.

Despite Friday’s jobs report coming in weaker-than-expected, investors are standing by the assumption that the US Federal Reserve will begin tapering before the end of the year and potentially start raising rates at some point in 2023.

Market analysts yesterday reiterated that the expectation for the Fed to start tapering in November remained intact, even as non-farm payrolls disappointed on Friday.

TreasuryONE’s currency strategist Andre Cilliers said the rand had closed flat on Friday at R14.95 against the dollar and had started the new week around similar levels.

“Despite the poor payrolls number on Friday, the market believes that the Fed’s taper timeline remains unchanged and will start in November,” Cilliers said.

BNP Paribas last week was bullish about the strength of the rand, saying the domestic currency could firm as much as 4 percent to about R14.25 to the dollar by year-end.

Jeff Schultz, senior economist at BNP Paribas, said their model BEER+ was forecasting the fair value of the rand at around R14, which suggested a tactical opportunity for being bullish on the rand, as external tailwinds begin to slow.

Investec chief economist Annabel Bishop yesterday agreed that the rand could see some further strength this week as market players continue to digest the slew of employment data from the US, and what it means for its quantitative easing tapering.

“Tapering is certainly expected in the first quarter, although any delays will likely give emerging markets currencies reprieve and the rand may see some strength this week.

“EM currencies have weakened on higher US treasury yields and some lags in emerging markets interest rate hikes, with uncertainty in general increased for markets by Friday’s figures.

“Nevertheless, there is space for some potential rand strength in the fourth quarter of 2021 now.”

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