South African Rand Strengthens as Gold Rally Offsets Weak Factory Data

The South African rand strengthened on Thursday, buoyed by a significant rise in the price of gold that overshadowed the release of weak domestic economic data.

Rand Rallies on Commodity Strength

The rand traded at 16.32 against the U.S. dollar by 1524 GMT, a gain of approximately 0.6% from its prior closing level, according to Investing.com data. The currency's move was closely tied to the price of gold, a crucial South African export, which climbed by more than 1%.

A broadly weaker U.S. dollar also provided a tailwind for the rand. The dollar index, which measures the greenback against a basket of other major currencies, declined by about 0.1%.

Weak Manufacturing Data Overlooked

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The currency's gains came despite a report from South Africa's statistics agency showing a larger-than-expected decline in industrial activity. Manufacturing output fell 4.3% year-on-year in May, accelerating from a 2.9% decline recorded in April.

This data points to persistent weakness in the domestic economy, but on Thursday, global factors and commodity price movements were the dominant drivers for the currency markets.

Equities Follow Miners Higher

South African stocks also rose, with the Johannesburg Stock Exchange's Top-40 index closing 1.1% higher. Gains were supported by mining stocks, which benefited directly from the surge in gold prices.