THE RAND MOUNTED a serious battle to end the day 0.3% lower at R19.14 against the US dollar yesterday after the unemployment data showed signs that South Africa’s economy was recovering, albeit at a slower pace.
The domestic currency has been on a free fall this week on worries over the health of China’s economy, South Africa’s biggest trading partner, falling to R19.27/$1 during early trade yesterday on risk-off sentiment. Disappointing Chinese retail sales and lower-than-expected industrial production figures have seen the Chinese Yuan fall under further pressure after the People’s Bank of China (PBOC) cut key policy rates for the second time in as many months.
TreasuryONE currency strategist Andre Cilliers said the risk-off sentiment continued to flow throughout the markets yesterday, with higher US Treasury Yields, poor Chinese data, and stimulus measures by the PBOC at the driving seat. Cilliers said the rand had also been under pressure due to rising Treasury Yields in the US, with US retail sales also likely a further driver for the dollar.
“Locally our terms of trade have been under pressure lately, and with China being one of our largest trading partners, a struggle in China could not bode well for us locally,” Cilliers said.
“The rand opened this morning just below the R19.10 handle, with risks for further weakness due to foreign factors rising for the rand.”
Though the rand has been weakened by the stronger dollar, yesterday’s strength came from promising unemployment data from Statistics South Africa’s Quarterly Labour Force Survey (QLFS).
The official unemployment rate decreased by 0.3% from a record high of 32.9% in the first quarter of 2023 to 32.6% in the second quarter of 2023.
Abigail Moyo, a spokesperson of the trade union Uasa, said while this was pleasing news, an unemployment rate of 32.6% in the current economic status was unacceptable as millions of citizens continued to slip into poverty.
“The current unemployment rate is comparatively equal to that of June 2021, a time when the country and economy were directly affected by Covid-19. Two years later, the economy is still depreciating with little to account for growth and job creation,” Moyo said.
“Our country has been battling unemployment for some years with no hope for change. We cannot hide behind Covid-19, maladministration, and various other challenges forever. A whopping 4.7 million young people are unemployed, desperately seeking employment.”
Economists also concurred that the economy was simply not growing sufficiently to allow businesses to expand and increase employment.
Meanwhile, the US dollar hovered near its highest levels in more than five weeks as traders increasingly bet interest rates will need to stay higher for longer and as the US economy remains much stronger than its peers.
The latest data in the US showed retail sales rose more than expected in July, pointing to strong consumer spending despite high prices and borrowing costs.