The rand depreciated for a third day after South African unemployment rose more than expected and as investors await guidance from the U.S. Federal Reserve on monetary stimulus.
The jobless rate increased to 25.6 percent in the second quarter from 25.2 percent in the three months before, as agriculture and the manufacturing industries shed jobs. The median estimate of economists in a Bloomberg survey was for 25.4 percent.
Weak global and domestic output, wage demand in excess of inflation and “very shaky local labor relations do not leave us particularly confident that the country is going to be able to create meaningful employment over the coming quarters,” Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities in Johannesburg, said by e-mail. “This view supports our argument that we are unlikely to see policy rates rise anytime soon.”
The rand depreciated as much as 1 percent and traded 0.3 percent weaker at 9.8218 per dollar by 3:58 p.m. in Johannesburg, trimming its gain in July to 0.6 percent. Yields on benchmark 10.5 percent bonds due December 2026 dropped three basis points, or 0.03 percentage point, to 8.18 percent. The yield is up 27 basis points this month.
The Fed’s Open Market Committee, which has said it may start paring stimulus should the U.S. economy meet the central bank’s forecasts, starts a two-day policy meeting today.
“All eyes are on the Fed,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said by phone. “Any sign that implies they might taper their asset purchases sooner rather than later will” undermine the rand, he said.
South Africa’s budget surplus in June was 20.1 billion rand ($2 billion), compared with a shortfall of 17.5 billion rand the previous month, the National Treasury said today. The median forecast of four analysts surveyed by Bloomberg was for a surplus of 16.5 billion rand.
“Today’s data should, on the balance, be positive for the market,” Rand Merchant Bank fixed-income analysts Carmen Nel in Cape Town and Mamello Matikinca in Johannesburg said in e-mailed comments. The monthly budget surplus “may bring temporary relief to the local market,” which has encountered “a bit of a demand deficit for government bonds,” they said.