South African Rand Strengthens on Gold Rally, Shrugging Off Weak Manufacturing Data

The South African rand strengthened on Thursday, buoyed by a rally in the price of gold, one of the nation's key exports. The currency's gains came despite the release of official data showing a significant contraction in domestic manufacturing activity.

Commodity Strength Outweighs Domestic Woes

The rand traded at 16.32 against the U.S. dollar by 1524 GMT, a gain of approximately 0.6% from its previous close. The move was primarily driven by external factors, as the spot price of gold climbed by more than 1%. As a major gold producer, South Africa's currency often tracks the price of the precious metal.

Adding modest support for the rand, the U.S. dollar index, which measures the greenback against a basket of other major currencies, edged down by 0.1% during the session.

Manufacturing Output Contracts

Ad

Earlier in the day, new economic data highlighted persistent weakness in the South African economy. According to the national statistics agency, manufacturing output fell by 4.3% year-on-year in May.

This marks an acceleration from the 2.9% year-on-year decline recorded in April and was a larger drop than many analysts had anticipated. For the day, however, currency traders appeared to place more weight on the positive momentum from commodity markets.

Johannesburg Stocks Rise

The positive sentiment from the resources sector also lifted the local stock market. The Johannesburg Stock Exchange's Top-40 index closed 1.1% higher, with mining shares among the leading contributors to the advance, according to market data.