Rand weakens despite firmer euro with bonds stable on PPI data

The rand was weaker on Thursday afternoon in erratic trade as the local currency struggled to find direction despite a firmer euro, and as global bond yields stabilised after rising sharply earlier in the week.

The euro firmed following the release of inflation data for the eurozone, which came in at 1.9% in April, from 1.2% previously. This could be a catalyst for a more pronounced phasing out of the European Central Bank’s (ECB’s) bond-buying programme.

The euro also clawed back some lost ground on easing political tension in Italy, and as the market kept an eye on Friday’s US nonfarm payroll figures for May, which are usually market moving.

However, the market has priced in little movement in the hourly wage data, which reflects inflationary pressure in the US economy. The unemployment rate is expected to remain unchanged at 3.9%, but nonfarm jobs created could tick up to 190,000 from the previous month’s 164,000. This is not expected to be a major mover for the dollar, which gained more than 3% on the European currency in May.

The dollar was on the back foot following disappointing US GDP data on Wednesday, while employment data from payrolls processor ADP proved to be worse than expected, setting up the prospect of disappointing nonfarm jobs data, FxPro analysts said.

At 3pm, the rand was at R12.5776 to the dollar from R12.5138, R14.6831 to the euro from R14.5988 and R16.753 to the pound from R16.6272.

The euro was at $1.1673 from $1.1665.

Global bonds continued to recover from an Italy-driven battering earlier, with the country’s benchmark 10-year bond yield last seen at 2.735% from 3.019%.

Release of the local producer price index (PPI) kept bonds stable. PPI rose 4.4% year on year in April from 3.7% in March, above consensus estimates of 4.2% year on year.

The yield on the benchmark R186 government bond was last at 8.525%, from 8.53%.

The US 10-year was unchanged at 2.8559%.