The rand surged to a three-week high, set for its first weekly advance in four, after U.S. payrolls rose less than projected in August, easing concern the Federal Reserve will start curbing asset purchases this month.
Employers added 169,000 workers last month following 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 policy makers have been weighing data to determine whether the economy is strong enough for it to scale back the pace of its $85 billion in monthly bond buying. Some South African gold miners returned to work last 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,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. “This is giving rise to some speculation that they won’t be able to start tapering in September.”
The rand appreciated as much as 1.5 percent to 10.0802 per dollar and headed for the strongest close since Aug. 16. It traded 1.2 percent up at 10.1187 by 3:56 p.m. in Johannesburg, bringing its gain this week to 1.6 percent, the first weekly advance since the five days ending Aug. 9. Yields on 10.5 percent bonds due December 2026 dropped 15 basis points, or 0.15 percentage point, to 8.41 percent for a decline of five basis points this week.
Earlier, the rand strengthened after some of the largest emerging-market nations announced plans to combine resources to stave off financial shocks.
China, Brazil, India, Russia and South Africa, known as the BRICS nations, will contribute to a $100 billion fund to shield against “unintended negative spillovers” from unconventional monetary policies in developed economies, according to a statement yesterday at the Group of 20 summit in St. Petersburg, Russia. South Africa’s foreign-currency and gold reserves rose more than estimated in August 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 U.S. economy recovers. South Africa’s budget deficit widened to 96.3 billion rand ($9.5 billion) in the year to July from 87 billion rand in the prior period, while second-quarter current-account data will be released next week.
“Access to a $100 billion 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,” Theuns de Wet, head of fixed-income research at Rand Merchant Bank in Johannesburg, said in an e-mail. While details are lacking, news of the fund “kept sentiment towards these countries’ currencies positive,” he said.
Gross reserves in Africa’s biggest economy climbed to $47.95 billion in August from $47.3 billion in July, the Pretoria-based Reserve Bank said on its website today. The median estimate in a Bloomberg survey of seven analysts was $47.7 billion. Net reserves increased 1.1 percent to $45.9 billion.
The central bank has been accumulating foreign currency to 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 418 million rand of South African bonds and 47 million rand of equities yesterday, according to JSE Ltd. data.