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Cape Town – Friday has been a great day for South Africa’s Mandela-clad currency, with the rand strengthening to the level seen when President Jacob Zuma’s future was being debated last weekend.
It had strengthened by over 1% by 15:00, trading at R12.78 to the dollar.
“US non-farm payrolls came out worse than expected at 138 000 vs 185 000,” TreasuryOne said on Friday. “This has placed emerging markets on the front foot.”
Earlier, the African National Congress (ANC) reacted strongly to the leak of Gupta emails, contradicting President Jacob Zuma’s stance that allegations of state capture were “rumours” and “hearsay” and that an inquiry would “recover the facts”.
The rand gained six cents immediately on the ANC’s statement that emails “call into question the integrity and credibility of the government”.
An hour later, the US jobs figures saw the rand strengthen even more, sharply gaining 10 cents against the greenback.
GRAPH: Intraday rand/dollar movement from Sunday to Friday (Source: Bloomberg)
A warning on the rand’s strength
While the rand retains a natural tendency to outperform its peers, a strong dollar and local political troubles will restrict any significant further rand gains this year.
That is according to Rand Merchant Bank currency analyst John Cairns on Friday, who was commenting on the latest strengthening of the rand.
South Africa is expecting another ratings decision by S&P Global Ratings and Moody's after Fitch on Thursday kept the local- and foreign-currency ratings at BB+ with a stable outlook.
FULL STORY: Rand retains natural tendency to push stronger – analyst
Bloomberg reported on Friday that the dollar fell after the latest jobs report offered mixed signals on the strength of the American labour market.
The latest jobs report likely won’t deter the Federal Reserve from increasing interest rates in two weeks as the economy continues to grind higher even as Washington shows few signs of moving forward with tax and spending reforms. Global equities have advanced more than 10% this year to set fresh records as data showed growth in the world’s largest economy is intact.
“People are realising that the American economy is in very good shape anyway and doesn’t need Trump to get things done,” said Ben Kumar, a London-based money manager at Seven Investment Management.
“It helps that the rest of the world is pulling its weight as well. It’s easier to survive bumps in the road if all the major economies are growing. Everyone wants to believe in this global recovery now.”
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