South Africa's Rand Falls to Record After U.S. Jobs Report

  • U.S. employment data show signs of labor-market durability
  • Jobs report bolsters case for Fed rate increase in December

South Africa’s rand fell to a record against the dollar and bond yields rose after U.S. jobs data supported the case for a Federal Reserve rate increase that would draw money away from emerging markets.

The rand slumped as much as 2.6 percent to 14.2689 per dollar, an all-time low, and traded 1.4 percent down at 14.0826 as of 4:40 p.m. in Johannesburg. Yields on benchmark government rand bonds due December 2026 climbed 4 basis points to 8.49 percent, the highest on a closing basis in five weeks.

U.S. employment in October surged by the most this year, wage growth accelerated and the jobless rate fell to 5 percent, signs of labor-market durability Fed policy makers are looking for as they consider a year-end boost in borrowing costs. The rand has depreciated 20 percent in the past year as prospects of higher rates in the U.S. bolstered the dollar.

“Essentially the market’s just fully priced in a December hike from the Fed,” Thando Vokwana, a currency trader at FirstRand Ltd., said by phone from Johannesburg. “You should see further weakness on the back of that.”

The 271,000 gain in payrolls was the biggest this year and exceeded all estimates in a Bloomberg survey of economists, a Labor Department report showed Friday. The median forecast called for a 185,000 advance. Average hourly earnings climbed from a year earlier by the most since July 2009.

Treasuries tumbled and the dollar strengthened as the report allayed concerns of a hiring slowdown after weaker payrolls advances in the prior two months. Such improvement will probably means a green light for Fed officials, who last month held out the possibility of a December rate increase.

Traders saw a 72 percent probability that the Fed would raise its benchmark rate next month, according to futures data compiled by Bloomberg, up from 56 percent before the jobs report’s release. A rise in U.S. interest rates would attract more funds to the dollar as the yield advantage of emerging-market assets narrows.

Foreign investors sold a net 3.3 billion rand ($234 million) of South African bonds yesterday, the most in a day since Sept. 28, according to Johannesburg Stock Exchange data.

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