President Ramaphosa’s talks of the nationalisation of the Reserve Bank earlier this week caused the rand to dive to a two-month low, and to its worst level against the dollar since the start of the year.
All eyes were on the US nonfarm payroll figures, which were released shortly before 16:00. While expectations were high, Oanda Analyst Edward Moya warned investors not to be surprised if the data showed a disappointing headline number. Ulas Akincilar, head of trading at INFINOX, explained:
“The one saving grace is that the Fed will surely kick any talk of rate hikes further into the future.”
Nevertheless, the rand recovered a bit on Friday 8 March as the US employment data provided some relief for emerging markets, after a nine-week slump. When the figures were released, the rand was at R14.43, showing a 0.55% improvement.
Even though the jobless rate decreased, the US data shows that employers hired fewer workers than predicted a month ago, while wages grew more than expected.
Bonds also improved, with the yield on the benchmark 10-year paper down four basis points to 8.665%.
Ramaphosa said on Friday that there was nothing sinister about nationalising the Reserve Bank, despite Mmusi Maimane pointing out that foreign investors would not risk their capital in South Africa if Ramaphosa pushes for nationalisation.
Ramaphosa maintained that his proposition to nationalise the Reserve Bank “has been done in numerous countries,” and added that only about six countries “have an external shareholding in central banks,” South Africa included. He explained:
“[Nationalisation] is the done thing around the world. The central bank is one of the most important institutions in the life of our country. And that is what the ANC resolved should be done.”
His comments caused havoc and the rand dropped from R14.50 on Friday morning to R14.54 by 10:00. A drop of nearly 0.24%. The situation appeared even more gloomy when the European Central Bank slashed its growth forecast for the Eurozone.
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