USD/ZAR rebounds from 1-month low as focus sets on US NFP

The USD/ZAR currency pair rebounded from a fresh 1-month low on Friday ahead of key US employment data later in the day, which will be closely watched for clues regarding the Fed’s rate outlook.

Still, the currency pair was on track to register a second consecutive week of losses, being down 0.65%.

“It has been a strong week for the rand … (as) the trade-weighted dollar gave up some ground, U.S. bond yields nudged lower and risk rallies emerged,” ETM Analytics wrote in a note to clients, cited by Reuters.

Market focus now sets on the US Non-Farm Payrolls report due out at 13:30 GMT today. Employers in all sectors of the US economy, excluding farming, probably added 180,000 job positions in January, according to market consensus, following a job growth of 216,000 in December.

Earlier this week, the Federal Reserve kept the federal funds rate target range unchanged, while Fed Chair Jerome Powell pushed back on the idea that an interest rate cut could come as early as March.

Markets are now pricing in a 37.5% chance of a Fed rate cut in March, compared to a more than 70% chance a month earlier.

“We continue to expect three rate cuts to take place in 2024, with the first cut taking place mid-2024, followed by subsequent cuts each quarter,” Raf Choudhury, investment director of multi-asset at abrdn, commented.

“We do think the market pricing in five or more cuts as soon as March seems ambitious and have more confidence in the dot plots which signal three cuts this year.”

As of 9:41 GMT on Friday USD/ZAR was edging up 0.29% to trade at 18.6480. Earlier in the session, the exotic Forex pair went down as low as 18.5270. The latter has been the pair’s weakest level since January 3rd (18.4923).