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South African rand weakens after strong U.S. jobs data

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Sunday, July 10th, 2022
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South Africa’s rand weakened against the dollar on Friday, as strong U.S. job data cemented expectations that the Federal Reserve may hike interest rate by another 75 basis points later this month.

At 1600 GMT, the rand traded at 16.8800 against the dollar, 0.99% weaker than its previous close. The rand, which has hit multiple lows through the week, fell to 16.9600 earlier in the day, a level unseen since September 2020

Data showed that U.S. nonfarm payrolls increased by 372,000 jobs in June. Economists polled by Reuters had forecast 268,000 jobs added last month. r

The data sent the dollar higher, which has hit consecutive 20-year peaks this week, gaining in five of the last six weeks. The dollar index , which measures the currency against six counterparts, was last trading at 106.96. r

Investec analyst Annabel Bishop said in a note that markets anticipate the differential between South Africa and U.S. interest rates to narrow, but the former is not expected to keep up with U.S. rate hikes.

“A narrowing of the interest rate differential between SA and U.S. interest rates typically causes rand weakness as the relative interest rate return between rand and dollar assets diminishes,” she said.

Stocks on the Johannesburg Stock Exchange (JSE) were slightly up, while Wall Street’s main indexes slipped on the stronger-than-expected U.S. jobs data. r

Overall on the JSE, the All-Share index (.JALSH) rose 0.62% to 68,327 points, while the Top-40 index (.JTOPI) closed 0.54% higher at 62,107 points.

The government’s benchmark 2030 bond was lower, with the yield up 4 basis points to 10.630%.

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