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South African Rand Strengthens on Rising Gold Prices Despite Weak Manufacturing Data
The South African rand strengthened against the U.S. dollar on Thursday, supported by a significant rise in gold prices and a weaker greenback. The currency's gains came despite new data revealing a sharper-than-expected contraction in the country's manufacturing sector.
Rand Rallies on Commodity Strength
The rand traded at 16.32 against the dollar by 1524 GMT, marking a gain of approximately 0.6% from its previous closing level, according to Investing.com data. The currency's move was largely driven by external factors influencing commodity-linked currencies.
Key drivers for the rand's performance included:
- Gold prices, a crucial determinant for South Africa's export revenue, climbed by more than 1%.
- The U.S. dollar weakened, with its index declining 0.1% against a basket of major currencies, which typically benefits emerging market currencies like the rand.
AdPositive sentiment also extended to the local equity market. The Johannesburg Stock Exchange's Top-40 index closed 1.1% higher, with mining stocks among the top contributors to the day's gains.
Weak Domestic Data Overlooked
The rand's appreciation occurred even as domestic economic indicators pointed to continued weakness. According to data released Thursday by the national statistics agency, South Africa's 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, signaling persistent headwinds for the industrial sector. However, for investors on Thursday, the positive momentum from higher commodity prices and favorable global currency dynamics outweighed the concerns raised by the poor local data.