Rand plunges on US jobs data expectations
THE RAND fell by 1 percent against the dollar yesterday as US jobs data sparked expectations that the Federal Reserve will cut back on asset purchases that have fed billions of dollars into high-yielding emerging markets.
Government bonds weakened, pushing yields to multi-week highs across the curve.
The benchmark R186 bond maturing in 2026 leaped 18.5 basis points to 8.265 percent and the shorter-dated 2015 bond climbed 12 basis points to 6.135 percent.
The rand closed 0.75 percent weaker at 10.3650/dollar after earlier plumbing a session low of 10.4050, its weakest in 11 weeks.
“Dollar/rand got kicked higher following much better than expected US non-farm payrolls,” said 4Cast emerging market analyst Anisha Arora. “Dollar/ rand upside remains vulnerable, with the psychological 10.50 the key level to watch.”
A scale-back of the U.S. Federal Reserve’s $85 billion-a-month bond purchases would be detrimental for the rand given South Africa’s heavy reliance on foreign portfolio flows to help plug a current account deficit.
The domestic news has also been negative for the rand, which has fallen more than 22 percent against the greenback this year, weighed down by strikes. – Reuters