The rand surged to a three-week high on Friday, set for its first weekly advance in four, after US payrolls rose less than projected last month, easing concern that the Federal Reserve will start curbing asset purchases this month.
US employers added 169 000 workers last month after a revised 104 000 increase in July that was smaller than initially estimated. The median forecast of 96 economists surveyed by Bloomberg called for an August increase of 180 000.
Fed policymakers have been weighing data to determine whether the economy is strong enough for it to scale back the pace of its $85 billion (R850bn) in monthly bond buying. Some South African gold miners returned to work on Thursday night after accepting a wage offer.
“It was a massive move on the rand, obviously related to the payrolls figure, although the resolution of the gold strike also played a role,” Nedbank head of strategic research Mohammed Nalla said on Friday.
“This is giving rise to some speculation that they won’t be able to start tapering in September.”
The rand was bid at R10.0348 to the dollar at 5pm on Friday, 17.47c stronger than the same time on Thursday, giving the currency its first weekly advance since the five days ending on August 9. Yields on 10.5 percent bonds due December 2026 dropped 15 basis points to 8.41 percent for a decline of five basis points for the week.
Earlier, the rand strengthened after the Brics nations announced plans to combine resources to stave off financial shocks. China, Brazil, India, Russia and South Africa will contribute to a $100bn fund to shield against “unintended negative spillovers” from unconventional monetary policies in developed economies, according to a statement on Thursday at the Group of 20 summit in St Petersburg in Russia.
South Africa’s foreign-currency and gold reserves rose more than estimated last month after the dollar price of bullion increased.
Emerging-market currencies including the rand are facing the steepest declines since 2008 on speculation that the Federal Reserve is set to reduce monetary stimulus as the US economy recovers. South Africa’s budget deficit widened to R96.3bn in the year to July from R87bn in the prior period, while second-quarter current-account data will be released this week.
“Access to a $100bn pool of funds during times of severe global capital slowdown should be a positive factor for the rand when concerns about the country’s twin deficits are very high,” Rand Merchant Bank head of fixed-income research Theuns de Wet said in an e-mail. While details were lacking, news of the fund “kept sentiment towards these countries’ currencies positive”, he said.
South Africa’s gross reserves climbed to $47.95bn last month from $47.3bn in July, the Reserve Bank said on its website on Friday. The median estimate in a survey of seven analysts was $47.7bn. Net reserves rose 1.1 percent to $45.9bn.
The central bank has been accumulating foreign currency to help protect against swings in the rand, the most volatile of 16 major currencies tracked by Bloomberg. The rand has dropped 16 percent against the dollar this year. The spot gold price rose 5.3 percent last month, according to data compiled by Bloomberg.
Foreign investors bought a net R418 million of South African bonds and R47m of equities on Friday, according to JSE data. - Robert Brand for Bloomberg