Rand firms as US jobs data comes in weaker than expected

05 October 2018 - 16:29 By Maarten Mittner
The renewed weakness in the local currency comes as international oil prices are at multiyear highs.
The renewed weakness in the local currency comes as international oil prices are at multiyear highs.
Image: Gallo Images/ IStock

The rand was slightly firmer on Friday afternoon as US nonfarm payroll data came in lower than expected‚ making it less likely that the US Federal Reserve will hike rates more aggressively than presently priced into the market.

Nonfarm payrolls rose by 134‚000 in September from a revised 270‚000 in August and less than the predicted 201‚000. The unemployment rate improved to 3.7% from 3.9%.

Average hourly earnings‚ the closely-watched gauge for inflationary pressures in the US economy‚ rose an annual 2.8% from 2.9%‚ as expected. This once again indicates that inflationary pressures remain muted in the US.

Oanda analyst Craig Erlam said an earnings number of 3% would have made people excited. “But the lower number certainly raised significant questions about hidden slack in the economy‚” he said.

Over the longer term‚ wage growth may pick up‚ notably against the background of Amazon promising to raise its minimum wage‚ with other employers urged to follow suit‚ Erlam said.

Analysts ascribed the weaker number to the possible effect of Hurricane Florence‚ but generally still described the US labour market as extremely healthy and indicative of a booming economy.

The rand weakened substantially in overnight trade‚ which‚ together with a higher oil price‚ strengthens the likelihood of an interest-rate hike by the Reserve Bank in November.

The renewed weakness in the local currency comes at a time when international oil prices are at multiyear highs‚ reigniting inflation concerns.

Brent crude was last seen at $84.46 a barrel‚ somewhat lower than on Thursday.

At 3pm the rand was at R14.7384 to the dollar from R14.8676‚ at R16.9943 to the euro from R17.1191 and at R19.2813 to the pound from R19.3584.

The euro was at $1.1531 from $1.1514.

Local bonds were weaker on the US data with the R186 bid at 9.25% from 9.19%.

US bond yields rose and remained steady at seven-year highs on the weaker dollar with the 10-year treasury last seen at 3.2125% from 3.1849%.

- BusinessLIVE