Waldo Swiegers/Bloomberg/Getty
- The rand reached 17.69 Rand/$ on Monday, as the dollar enjoyed the boost from a strong jobs report and expectations that more interest rate hikes are on the way.
- The local currency has also been affected by news of a sharp contraction in local business activity.
- The rand started the year at R17.00.
By Monday night, the rand sank to $17.69 as the dollar continued to gain after a US jobs report.
A move away from riskier assets such as the rand was compounded by geopolitical concerns. This weekend, the United States shot down a suspected Chinese spy balloon that had been floating across the country for days.
The rand has been bleeding heavily since Friday, with news of a sharp contraction in local business activity adding to the pressure on the currency.
The S&P Global Purchasing Managers’ Index (PMI) for South Africa fell to 48.7 in January from 50.2 in December.
It was the fastest pace of contraction since late 2021 as new orders fell due to reduced cargo and the failing economy, Reuters reported.
The rand started the year around R17.00/$. It also lost ground against the euro (R18.96) and the pound (R21.25) on Monday.
heavy punch
The global market rally that it enjoyed through January came to a halt this month as investors eye a prolonged period of high borrowing costs aimed at bringing inflation down from multi-decade highs.
A softer tone from the Fed regarding its tightening campaign had allowed market participants to consider a pause, or even a cut, later in the year.
But that optimism was dealt a blow on Friday when data showed more than half a million new jobs were created in the United States last month, nearly double December’s number and well above the 188,000 expected.
Government figures also showed unemployment fell to the lowest level since 1969.
The reading showed the world’s largest economy held strong despite nearly a year of skyrocketing rate hikes and prices, indicating the Fed still has a lot of work to do to rein in inflation.
“We are concerned that, on the back of this type of employment report, it will definitely keep the Fed on a higher path for longer,” said Lisa Erickson of US Bank Wealth Management.
“Of course, there are other data points to come before the next meeting, but it certainly puts a placeholder that the labor market continues to be at risk of being extremely tight.”
Traders now expect the Fed to continue raising rates to above 5% before stopping.
And San Francisco Fed chief Mary Daly said she was prepared to continue raising while rates would also stay high for some time.
All three major indexes slumped on Wall Street, with the Nasdaq tumbling more than 1% as tech companies were hurt by disappointing earnings from giants Amazon, Alphabet and Apple.
Losses continued in Asia, with Hong Kong falling around 2%, while Shanghai, Sydney, Seoul, Taipei, Bangkok, Wellington, Manila and Jakarta also fell.
The JSE All Share Index fell nearly a percent on Monday at noon, with Kumba (-4%) and Northam (-3.5%) among the biggest losers.
London, Paris and Frankfurt opened with losses.
However, there were gains in Tokyo.
Mumbai fell again with the troubled empire of tycoon Gautam Adani suffering further heavy losses, meaning it has now lost around $120 billion.
Flagship Adani Enterprises, which gained more than 1000% in five years before the loss, was down 2.6%, after being down almost 10% in early trading.
Trading in Adani Total Gas and Adani Power was suspended again after shares fell 5%.
Traders were aware of China-US relations after the shooting down of the giant balloon over the weekend.
Pentagon officials described the aircraft as a “high-altitude surveillance balloon” and added, without elaborating, that Washington had taken steps to prevent it from collecting sensitive information.
Beijing criticized the move, warning that it “severely affected and damaged” relations, having previously said it was a weather balloon blown off course.
The incident dealt a blow to already strained relations, and Secretary of State Antony Blinken on Friday canceled a planned rare trip to Beijing designed to contain rising tensions.
In currency markets, the prospect of much higher rates sent the dollar higher against its major peers on Friday and held onto gains on Monday.
The yen further weakened on a report that Lieutenant Governor Masayoshi Amamiya could succeed Haruhiko Kuroda as Bank of Japan director later this year.
Watchers said such a move could prompt the central bank to stick to ultra-loose monetary policy that has prevented it from raising interest rates.
