The Rand gets hammered and mixed fortunes for the Aussie and Kiwi – 10th December 2015

Australian employment figures were released overnight with analysts forecasting a loss of 10,000 jobs in November and unemployment rising from 5.9% to 6.0%. When the Australian Bureau of Statistics reported the addition of 71,000 jobs last month and a drop of unemployment to 5.8% investors were startled. The Aussie Dollar gained two cents higher on the news but has since given back half of that gain because nobody quite believes the accuracy of the data.

The Aussie Dollar’s cousin, the Kiwi Dollar, is also up following the Reserve Bank of New Zealand’s decision to cut its benchmark interest rate from 2.75% to 2.5%. Because the move was widely expected, and as a result of the RBNZ’s comment that it expects its inflation target to be achieved “at current interest rate settings”, the Kiwi moved three cents higher following the announcement, more than offsetting the losses it had incurred yesterday.

The South African Rand on the other hand came to grief in spectacular fashion yesterday evening on news that President Zuma had sacked his finance minister, Nhlanhla Nene, replacing him with David van Rooyen. The removal of Mr Nene has therefore cast doubt on the government’s commitment to tackling the country’s fiscal deficit. In little more than half an hour the rand lost 4% of its value, falling to all-time lows against Sterling at 23.40. The Rand has staged a slight recovery but is still down by -4.3% on the day as a result of earlier losses.

Had it not been for the Rand, the US and Canadian Dollar’s would have been the day’s biggest losers. Both fell by around -1%; a cent and a half for the US Dollar and two cents for the Canadian Dollar against Sterling. There was no clear justification for the move so it might have resulted simply from investors squaring their positions in good time for the US Federal Reserve’s rate announcement next week.

There are two more central bank policy decisions to come today, from the Swiss National Bank and the Bank of England. One is fairly predictable; the other is not. The ecostat agenda holds little promise. Most believe the Bank of England will keep its Bank Rate at 0.5% for an 82nd month, with eight members of the Monetary Policy Committee voting for an unchanged benchmark rate and one in favour of an immediate increase. The Swiss National Bank’s decision is a different matter. A move further into negative territory is easy enough to imagine.