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Record unemployment rate data hinders rand’s rally against the dollar

The rand lost steam yesterday and retreated 4c to R13.76 against a softer dollar yesterday by 5pm as data showed that South Africa’s unemployment rate hit a new record 13-year high in the first quarter, having touched a near 2-year high of R13.69 earlier in the day. Photo: Reuters

The rand lost steam yesterday and retreated 4c to R13.76 against a softer dollar yesterday by 5pm as data showed that South Africa’s unemployment rate hit a new record 13-year high in the first quarter, having touched a near 2-year high of R13.69 earlier in the day. Photo: Reuters

Published Jun 2, 2021

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THE RAND LOST steam yesterday and retreated 4c to R13.76 against a softer dollar yesterday by 5pm as data showed that South Africa’s unemployment rate hit a new record 13-year high in the first quarter, having touched a near 2-year high of R13.69 earlier in the day.

Risk appetite continued to bolster the local unit, despite a looming third wave of Covid-19 infections and level 2 lockdown restrictions.

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Bianca Botes, a director at Citadel Global, said the rand had shrugged off last week’s negative reviews by ratings agencies as it continued to strengthen on Monday and yesterday.

The dollar softened yesterday, edging toward five-month lows. The dollar index was down 0.124 percent at 89.68, having risen as high as 90.447 on Friday, when a measure of US inflation closely watched by the Federal Reserve posted its biggest annual rise since 1992, according to Reuters.

Data from Statistics South Africa showed that the unemployment rate ticked up slightly by 0.1 of a percentage point in the first quarter of 2021, from 32.5 percent in the fourth quarter of 2020.

The official unemployment rate now stands at 32.6 percent as 7.2 million people are without jobs, mainly the youth aged 15-34. Economists said that the high unemployment rate reflected the deep depressed impact of Covid-19 restrictions and overall economic activity across all major economic sectors.

Meanwhile, South Africa’s manufacturing output experienced a solid improvement and rose to a seven-month high in May, reaching its highest level since last October.

The Absa manufacturing Purchasing Managers’ Index rose to a solid 57.8 points in May from 56.2 points the month before as four of the five subcomponents remained well above the neutral 50-point mark. Only the employment index dipping back into negative terrain.

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Absa said while current business conditions improved in May, purchasing managers turned slightly less optimistic about the trading environment going forward. The markets closed in the green yesterday, boosted by gains in mining sector stocks, industrials and energy.

The JSE All Share Index extended gains for the sixth consecutive day, touching 68 923 points yesterday to reach the highest level since May 10.

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