Rand loses shine as dollar perks up

THE rand bowed to pressure from a strong dollar on Friday following a better-than-expected US nonfarm payrolls report.

US employers added 254 000 jobs in July, blowing past market forecasts of an increase of 180 000. The report boosted the dollar and hurt the rand as expectations grew that the US Federal Reserve may raise interest rates this year after all.

The rand lost about 20c to R13.82/$ in the immediate aftermath of the report, which also revised upwards the jobs that were created in June to 292 000 from 287 000.

Higher US rates make the dollar attractive as they boost returns on assets denominated in the currency.

The strong dollar also weighed heavily on commodity prices, with platinum and gold prices dropping 2% in late trade on Friday. The drop in metal prices reflected negatively on miners, particularly gold and platinum shares on the JSE.

However, Capital Economics’ analysts said in a note that “Fed officials will want to see more evidence of a pick-up in wider GDP growth before taking action, maybe in December”.

The All Share index finished 0.85% weaker at 52 348.40 points on the week, which also featured local government elections and the introduction by the Bank of England of a package of stimulus measures to contain the effects of the Brexit vote.

The BoE cut rates by 25 basis points and expanded purchases of government bonds as part of its broader efforts to boost the UK economy.

With little data scheduled on the local front this week, the rand, local bonds and the JSE will likely take direction from overseas markets, particularly the US, which will release retail sales figures.

“Macroeconomic data will dominate the trading backdrop over the course of the next session or two, as market participants are increasingly turning their attention to economic statistics as the [US] secondquarter earnings season runs to a close,” Momentum SP Reid Securities said in a note.