Rand slides to R16.71 as a weak US jobs report reshapes the rate bets

The rand traded at R16.71 to the US dollar on Monday morning, its weakest level since July, after a fourth consecutive week of decline that has taken it from below R16 to the dollar.

As IOL reported on Monday, the currency was also quoted at R18.67 to the euro and R22.06 to the British pound. Reuters attributed the slide to a stronger dollar and rising global bond yields, which have encouraged investors to pull money out of emerging-market assets.

Investec chief economist Annabel Bishop pointed to the Middle East conflict, higher oil prices and safe-haven flows into the dollar as additional pressures on the rand. She noted that the currency has weakened much less against the euro and the pound, which suggests the latest move is partly about dollar strength rather than a sharp deterioration in South Africa’s own fundamentals.

That distinction matters for anyone watching their petrol price or their grocery bill. A rand that is falling mainly because the dollar is rising is a different problem from a rand that is falling because investors have lost faith in South Africa. The first is largely imported. The second would need a domestic answer.

What moved global markets on Monday was a set of US employment numbers that came in far below expectations. The world’s largest economy created just 29,000 jobs in September, against forecasts of around 90,000, and the readings for the two previous months were revised down. July’s figure now shows that jobs were lost.

Markets repriced the odds of another Federal Reserve rate hike almost immediately. CME’s FedWatch tool put the chance at just over 20 percent, down from more than 65 percent early last week.

Stephen Innes of SPI Asset Management described the recent hiring trend as sitting in a “not-too-hot, not-too-cold Goldilocks porridge zone” of roughly 40,000 to 60,000 jobs a month. He said core personal consumption expenditure inflation remains uncomfortable at three percent year on year, but that the shorter-term pulse has cooled.

Equities rallied on the news. Tokyo’s Nikkei 225 closed up 2.4 percent at 69,946.86, briefly topping 70,000 points for the first time since July. Hong Kong’s Hang Seng added 0.3 percent, and Sydney, Singapore, Wellington, Bangkok, Mumbai, Manila and Jakarta all advanced. London’s FTSE 100 edged up 0.1 percent, while Frankfurt and Paris edged down. Seoul and Shanghai were closed for holidays.

Oil prices fell, extending Friday’s drop. Brent North Sea crude was down 1.0 percent at $101.22 a barrel, still above $100, while West Texas Intermediate fell 1.6 percent to $89.69. The decline followed a G7 decision to release 100 million barrels of diesel and crude from reserves over four months, and a move by Saudi Arabia to cut the price of its benchmark grade to Asia to $5 below the regional benchmark.

For South African motorists, the oil price is the other half of the fuel equation. A softer Brent price works in the country’s favour at the pump. A weaker rand works against it. Which force wins by the time the Department of Mineral Resources and Energy sets its monthly fuel adjustment is the number that ordinary households will actually feel.

Oil market analysts also flagged that the situation for refined fuels such as diesel remains tight, because refineries were damaged during the Middle East conflict and Russian refineries have suffered damage from Ukrainian strikes. Exports of crude from the Middle East, excluding Iran, surpassed pre-war levels last week, according to the maritime tracking firm Kpler, but diesel is a different market with a different set of constraints.

On currency markets, the dollar weakened slightly against the yen, trading at 157.67 yen from 157.87 on Friday, and the euro slipped to $1.1200 from $1.1256. The pound was at $1.3229.

Source: IOL, Monday Markets: SA rand tanking, but oil prices softer and stocks rally on ‘Goldilocks’ data