The South African rand experienced a significant downturn this Tuesday, continuing a week of losses driven by a robust U.S. dollar and increasing U.S. Treasury yields. The currency traded at 19.2525 against the dollar, marking a 0.2% drop from its previous close.
Monday saw the rand slump by approximately 1.5%, weighed down by the buoyant dollar and local economic data that revealed factory activity had contracted for the eighth consecutive month. This recent downturn follows two months of robust performance, a sharp reversal that has seen the currency slip from a low of R18.86 to a high of R19.33 against the dollar.
The dollar's strength has been particularly notable, impacting both emerging and established currencies alike. The Dollar Index (DXY) broke past previous resistance of 105.8 to reach a high of 107.2 in Tuesday's trading session, gaining ground against 16 of the top 19 currencies monitored.
In addition to the surging dollar, the rand was hit by rising bond yields and struggling equity markets. South Africa's benchmark 2030 government bond weakened in early deals, with the yield rising 2 basis points to 10.920%. Meanwhile, equity markets have been under pressure, with the S&P 500 undergoing its first major correction in several months as investors adopt a risk-off stance.
The rand has had a turbulent year overall, hitting an all-time low against the dollar in June before recovering some ground, only to slip again. It is currently down more than 11% against the greenback year-to-date.
Looking ahead, several upcoming market events may induce further volatility this week. These include Tuesday's JOLTS job openings data in the U.S., expected to decrease to 8.6 million from 8.8 million in the previous period, and Friday's release of U.S. nonfarm payrolls (NFP) data and unemployment figures. The NFP data is anticipated to show a decrease to 150,000 from a reading of 187,000, signaling a slowdown in the U.S. job market, while the unemployment rate is expected to hold steady at 3.8%.
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