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South African Rand Gains as Gold Rally Outweighs Weak Manufacturing Data
The South African rand strengthened on Thursday, as a rally in the price of gold, a key national export, provided a significant tailwind for the currency despite the release of weak domestic economic data.
Rand Strengthens on Commodity Tailwinds
The rand traded at 16.32 against the U.S. dollar by 1524 GMT, representing a gain of approximately 0.6% from its previous close, according to market data. The currency's move was primarily supported by a more than 1% increase in gold prices.
A weaker U.S. dollar also contributed to the rand's strength. The dollar index, which measures the greenback against a basket of other major currencies, declined by 0.1% during the session.
AdWeak Domestic Data Fails to Dent Sentiment
Investor focus on external factors overshadowed concerning domestic news. South Africa’s manufacturing output contracted by 4.3% year-on-year in May, a steeper decline than the 2.9% drop recorded in April, the national statistics agency reported on Thursday. This larger-than-expected fall points to persistent weakness in the country's industrial sector.
Despite the negative manufacturing report, the positive momentum from higher commodity prices was the dominant driver for the rand's performance. On the Johannesburg Stock Exchange, the Top-40 index reflected the positive sentiment, closing up 1.1%, with mining stocks among the top performers.