The rand remained under pressure on Friday, ending the week softer as sentiment remained fragile.
The local currency has posted losses three out of five days, bringing the week’s losses to 3.4%, as the dollar “continues to find strong support from both global recession fears and expectations for the Fed to stick to its aggressively front-loaded monetary tightening cycle,” said Investec chief economist Annabel Bishop.
The dollar also found support after US data showed the world’s largest economy created more jobs than expected in June, solidifying expectations that the Fed will raise interest rates by another 75 basis-points at the federal open market committee meeting this month.
The rand hovered around a 21-month weakest level, and by 6.30pm it had retreated 1.22% to R16.8991/$, having touched an intraday worst of R16.9626/$. It weakened 1.21% to R17.1696/€ and 1.17% to R20.3152/£. The euro was lower at $1.0161, still flirting with its weakest levels in about two decades.
“In addition to the global growth concerns and Fed’s aggressive monetary policy tightening, the rand also weakened on load-shedding and the negative effects on investor sentiment from the Fed’s hawkish tone , confirmed in its June minutes released this week, which essentially highlighted the need to reduce economic activity significantly to contain inflation,” said Bishop.
The JSE tracked firmer US and European stocks as the markets digested the stronger-than-expected US jobs report.
“Stocks initially came under pressure as markets priced in another aggressive Fed rate hike, settling slightly higher as a decent nonfarm payrolls report didn’t really shift expectations too much over Fed tightening,” said Oanda senior market analyst Edward Moya.
“Though the jobs report was a positive sign for the state of the US, many investors believe that will allow the Fed to aggressively fight inflation with rate hikes in the coming months,” Moya said. “Investors should get used to a choppy stock market for the rest of the year as the Fed tries to navigate a soft landing.”
The JSE gained 0.62% to 68,327 points and the top 40 added 0.54%. The precious metals and mining index rose 4.2%, resources 1.82%, financials 0.71% and industrial metals and miners 0.58%.
At 6.20pm, the Dow Jones industrial average was 0.15% firmer, whileLondon’s FTSE 100 added 0.1%, France’s CAC 40 firmed 0.44% and Germany’s DAX 30 advanced 1.34%.
Gold gained 0.18% to $1,742.14/oz and platinum 2.17% to $894.50. Brent crude rose 3% to $107.11 a barrel, but is down 11% so far this month.
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