Rand (ZAR) Broadly Softer after Chinese Import Data

The South African Rand extended declines against the US Dollar on Monday after sliding against the US currency at the end of last week as a result of the impressive US Non-Farm Payrolls report. The emerging-market currency dropped to 11.4988 against the US Dollar after the US economy was shown to have added considerably more positions than forecast in January. The jobs gain of 257,000 smashed expectations for an employment increase of 230,000 and saw the US Dollar rally against the majority of its most-traded counterparts. Given that the participation rate and average earnings also increased by more-than-expected, the NFP report saw some industry experts bring forward their predictions for the first increase in borrowing costs from the Federal Reserve.

In the view of currency dealer Ion de Vleeschauwer; ‘The mighty Dollar is again flexing its muscles against every other currency in both the emerging and developed markets.’ At the beginning of a new week of trading the Rand also fell against the Euro and registered an almost 1% decline against the Pound. The Rand was left trading in a broadly weaker position as China’s trade data showed a shocking -19.9% drop in imports. As South Africa relies heavily on China as a trading partner, the data was viewed as a bad omen for the African nation’s future prospects.

Tomorrow the Rand is likely to experience further volatility due to the publication of South Africa’s unemployment and manufacturing production reports. If the level of joblessness is shown to have increased in the fourth quarter of 2014 from the third (as economists believe will be the case) the Rand could stumble. Manufacturing production, meanwhile, is expected to have increased modestly on the month in December but to have fallen by -0.62% on the year. Later in the week, South Africa will be releasing mining production numbers. Mining output dropped by -1.2% on the month in November so it would take a sturdy rebound in December to push the Rand higher. The UK’s industrial/manufacturing figures, the NIESR GDP estimate and the Bank of England’s inflation report will all have an influence on GBP/ZAR trading this week. The direction taken by the USD/ZAR pairing could be determined by the US advance retail sales figure.