After weakening last week in response to weaker-than-forecast South African PMI data the currency was able to rally on Friday following the release of the much anticipated US non-farm payrolls report.
At the current exchange rate 1 US Dollar will purchase 9.0525 South African Rand as of 10:00 am GMT
Although economists expected US non-farm payrolls to increase by 200,000 they actually only increased by 88,000 as jobs in the retail sector fell.
On average the US economy gained 169,000 jobs per month over the previous 12 months, almost double March’s figure.
The employment report showed that job gains were most notable in healthcare and professional/business services.
Following the report’s release the Rand strengthened from R9.1640 to R9.0925 before the close of trade on Friday.
As markets opened this morning the Rand was trading in the region of R9.0857.
The Rand was initially little affected by the release of South African foreign reserve figures for March, which showed that foreign exchange reserves fell while gold reserves rose.
In response to the figures the Reserve Bank asserted that the drop in gross reserves reflected valuation adjustments triggered by the Dollar’s appreciation, which had been partially offset by the gains in the market price of gold.
As one analyst noted: ‘Given both Dollar and risk asset weakness, the environment could be seen as a mixed one for the Rand. In the end it’s the Dollar’s value that has dominated, explaining the fall in Dollar/Rand. This cautions that further Dollar/Rand moves are contingent on Euro/Dollar. The weak US data has also hit commodity prices, with Brent oil notably falling to $105 a barrel. Precious metals, though, have actually rallied so in all commodity moves could be seen as slightly Rand positive.’
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