Rand Weakens, Paring Weekly Gain, on U.S. Unemployment Concern

By Garth Theunissen

Sept. 4 (Bloomberg) -- The rand weakened from a six-week high as economists speculated a report will show U.S. unemployment rose, dulling risk appetite on concern the world’s largest economy is struggling to recover from recession.

The rand depreciated as much as 0.6 percent to 7.6925 per dollar and traded 0.3 percent weaker at 7.6697 by 10:18 a.m. in Johannesburg. Earlier the rand gained 0.1 percent to 7.6341, the strongest level since July 23.

Unemployment in the U.S. probably rose to 9.5 percent in August from 9.4 percent in July, according to the median of 77 estimates in a Bloomberg News survey. Rising joblessness underscores Treasury Secretary Timothy Geithner’s view that it’s “too early” to begin exiting from stimulus measures aimed at reviving the U.S. economy.

“The rand is retracing a bit because there’s some caution ahead of the U.S. non-farm payrolls data,” said John Cairns, head of foreign-exchange research at Rand Merchant Bank in Johannesburg. “Investors don’t like taking big positions before an important data release that could impact negatively on risk appetite.”

Today’s decline pared the rand’s third weekly climb to 1.1 percent. The currency gained 2 percent yesterday after a report showed South Africa’s current-account deficit more than halved in the second quarter, reducing the country’s reliance on foreign capital.

“The significant improvement in the current-account deficit was far better than the market expected and is a big positive for the rand,” said Cairns. “It alleviates the need for foreign portfolio inflows.”

Current Account

The deficit on the current account, a measure of trade in goods and services, shrank to 3.2 percent of gross domestic product in the three months to end-June, the lowest since March 2004, down from 7 percent in the first quarter and narrower than the 4.4 percent median analyst estimate.

Foreign investors have been net buyers of almost 76 billion rand ($9.9 billion) of South African assets this year, according to data from the JSE Ltd., which runs the nation’s stock and bond exchanges. The capital inflows have helped the rand rally almost 23 percent against the dollar this year, making it the second-best performing major currency monitored by Bloomberg.

A gain of 3.5 percent in gold and 0.7 percent advance in platinum this week also boosted the currency of South Africa, an exporter of both metals.

Government bonds increased, with the yield on South Africa’s benchmark 13.5 percent security due September 2015 dropping 10 basis points from yesterday’s close to 8.04 percent. The bond’s price, which moves inversely to the yield, gained 51 cents from yesterday to 125.65 rand. In the week its price rose 57 cents.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net