South African rand stronger after U.S. jobs data, markets fall

JOHANNESBURG: South Africa's rand strengthened on Friday afternoon, as the dollar was weighed down by some of the weaker details of what was overall a strong U.S. non-farm payrolls report.

At 1520 GMT, the rand traded at 14.3000 against the dollar, 1.1pc stronger than its previous close and erasing most of the previous day's losses.

Payrolls beat expectations, increasing by 850,000 jobs last month, but the unemployment rate rose to 5.9pc from 5.8pc in May and a closely-watched gauge of wage inflation rose less than expected.

A stronger report would have bolstered expectations that the U.S. Federal Reserve will tighten policy earlier than expected in the wake of a surprise hawkish shift last month.

Emerging market currencies like the rand thrive on U.S. interest rates remaining low because they benefit from the interest rate differential that increases their appeal for carry trade.

South Africa's benchmark 2030 government bond posted modest gains, with the yield falling 2.5 basis points to 8.93pc.

The stock market continued to swing between gains and losses since the beginning of the week as investors tried to gauge the impact of the new coronavirus lockdown curbs in the country.

The benchmark all-share index ended down 0.35pc to end the week at 66,324 points, while the all blue-chip index of top 40 companies closed the day down 0.3pc to 60,293 points.

While the lockdown restriction did have a marginal impact on the market, a weaker local currency and uncertainty over the future of commodity prices are the two major factors keeping the market worried, said Wayne McCurrie, portfolio manager at bank FNB.

"South Africa is a commodity driven economy, a commodity exporter and I believe that the commodity cycle is behind us," he said, adding that this is what is pulling the market down.

But despite the market fall on Friday, the broader index closed marginally higher from where it was a week ago.