Story
South African Rand Gains as Gold Rally Outweighs Weak Manufacturing Data
The South African rand advanced against the U.S. dollar on Thursday, buoyed by a rally in gold prices that offset negative domestic economic data. The currency traded at 16.32 against the dollar by 1524 GMT, a gain of approximately 0.6% from its prior closing level, according to a report from Investing.com.
Commodity Tailwinds
The rand's strength was primarily driven by external factors. As a key commodity-linked currency, it benefited from a more than 1% increase in the price of gold, one of South Africa's major exports.
Aiding the rand's advance, the U.S. dollar index, which measures the greenback against a basket of other major currencies, edged down by 0.1%, making dollar-denominated assets like gold more attractive to holders of other currencies.
Domestic Economic Weakness
AdThursday's gains occurred despite the release of discouraging local economic figures. Data from the country's statistics agency showed that manufacturing output contracted by 4.3% year-on-year in May.
This marked a significant acceleration from the 2.9% year-on-year decline recorded in April, signaling persistent weakness in a key sector of the South African economy. However, currency markets appeared to prioritize the positive momentum from commodity prices.
Equity Market Response
Reflecting the positive sentiment in the resources sector, the Johannesburg Stock Exchange's Top-40 index also saw gains. The blue-chip index closed 1.1% higher for the day, with mining stocks contributing significantly to the upward movement.