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Pressure mounts on the rand in the run up to the release of US jobs data

by , 06 November 2015

After flirting close to R14 to the dollar yesterday, the rand continues to feel the strain on emerging market currencies.

Later today, the US Labour Department will release its non-farm payrolls.

If data comes out better than expected, the rand could be under further strain as it increases the chance of a US interest rate hike next month.

Let's take a closer look…


The rand is feeling the strain of today’s data release

 
The rand showed some signs of weakness again this morning, says Fin24. This as traders believe pressure will mount on the local unit “if US jobs numbers due later in the day were better than expected”.
 
The rand didn’t react to news that the Reserve Bank increased “domestic net gold and foreign exchange reserves… to $41.308 billion” last month, reports IOL. But gross reserves fell to $46.051 billion.
 
An impending interest rate hike in the US isn’t good news for emerging market currencies, notes BDLive. It’s leading traders to dump riskier assets, such as the rand, in favour of the dollar.
 
Yesterday, the release of new car sales data showed that the weak rand was having a negative impact, says the SABC. Last month, sales fell 8.6% compared to October last year. 
 
Car manufacturers said they’re concerned “about the weakening rand as they cannot keep up with pricing due to a shrinking domestic new vehicle market,” adds the SABC.
 
US jobs data isn’t due for release until 14:30 this afternoon.
 

US jobs data will push the rand stronger or weaker

 
NKC African Economics said the release of the data puts the rand “in a precarious situation,” adds Fin24. If the data is strong, the dollar could strengthen further, which is detrimental to emerging market currencies.
 
Barclays Research is expecting “growth of 175,000 [jobs] and a one-tenth decline in the unemployment rate to 5%,” says BDLive.
 
At time of writing, the rand was trading at R13.91 to the dollar, R15.13 to the euro and R21.11 to the pound.
 
Today’s US jobs data will determine what direction the rand is going to take.
 
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Pressure mounts on the rand in the run up to the release of US jobs data
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