The South African Rand (ZAR) exchange rate eased against the Pound (GBP) on Tuesday after domestic data showed that unemployment increased more-than-forecast in the second quarter of the year.
On Monday the Rand recovered some ground against a number of its major peers after South African metalworkers agreed to a deal to end a month long strike.
Members of the NUMSA trade union agreed to a three-year wage deal, easing concerns over labour unrest in Africa’s most advanced economy.
The impact upon South Africa’s economy is expected to damage the nation’s economic growth prospects for 2014. Growth is expected to rise by at least 0.3%.
‘There is no doubt that the economy suffered major direct losses in this strike. The indirect impact, like carmakers which could not get components, could be even bigger,’ said Mike Schussler, chief economist at research group Economists.co.za.
The Rand’s gains were short-lived however as data out on Tuesday showed unemployment increased more than expected last month.
According to Statistics South Africa, unemployment in the country increased to a seasonally adjusted figure of 25.50%, from 25.20% in the preceding month.
Economists had been expecting the unemployment rate to rise to 25.40%.
South African Rand to Pound (ZAR/GBP) Sterling Exchange Rate Forecast
The South African Rand is forecast to experience volatility for the rest of the week as the markets look ahead to the release of a number of major data reports.
US data is likely to support the ‘Greenback’ which will in turn put pressure upon the Rand and other emerging market currencies.
South Africa’s trade deficit is also forecast to widen as the strikes weighed upon production and in turn affected exports.
‘Trade data so far suggests the current account deficit could widen to more than 6% of GDP in the second quarter. South Africa’s economy is dependent on foreign portfolio flows to fund this shortfall, which leaves the Rand extremely vulnerable to shifts in sentiment toward emerging markets,’ said an economist at NKC Independent Economists in a market note.
The balance of trade data is due for release on Thursday.
South African Rand (ZAR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,South African Rand,17.9549 ,
Euro,,South African Rand,14.2300 ,
US Dollar,,South African Rand,10.5879 ,
Australian Dollar,,South African Rand,9.9650 ,
[/table]
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