Rand plunges to worst level in nine months

South Africa’s rand plunged to the weakest level in nine months against the dollar after US jobs data came in far stronger than expected, more evidence that interest rates there could stay higher for longer. 

The currency breached 19 to the US unit for the first time since June, raising concerns it could soon hit a record low if the downward pressure continues. The rand traded at 19.12 per dollar at 4:39 p.m. in Johannesburg.

Its 0.9% decline made it the worst-performing major currency against the dollar Friday after Brazil’s real and South Korea’s won. 

The US economy in December added the most jobs since March, and the jobless rate unexpectedly fell, supporting the case for a pause in Federal Reserve interest-rate cuts and sending the dollar soaring. 

The Labor Department data add to pressures, including fears of potential tariff increases under US President-elect Donald Trump.  

“A really sharp turn in sentiment would be needed in order for the rand to break above 20,” said Brendan Mckenna, an emerging-markets economist and currency strategist at Wells Fargo Securities.

“But I think the probability of a more material risk-off scenario is indeed rising.”

The rand is headed for its fourth straight week of declines against the dollar, poised to drop 2.1% this week alone. That puts the currency at the bottom of the emerging-market pack and marks the longest losing streak since May 2023.

Meanwhile, forward-rate agreements, which reflect expectations for borrowing costs, now suggest a 56% chance of the South African Reserve Bank cutting its benchmark policy rate by 25 basis points at its January 30 meeting, less than the 72% probability seen earlier in the week.