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South African Rand Strengthens on Surging Gold Prices, Shrugging Off Weak Manufacturing Data
The South African rand firmed against the U.S. dollar on Thursday, drawing strength from a rally in gold prices that offset the impact of bleak domestic economic data.
By 1524 GMT, the rand traded at 16.32 per dollar, representing an approximate 0.6% gain from its previous closing level, according to Investing.com data.
Commodity Strength Boosts Rand
The primary driver for the rand's appreciation was a more than 1% increase in the price of gold, a crucial export for the South African economy. As a commodity-linked currency, the rand often benefits from higher prices for its key exports.
The move was also supported by broader market dynamics, with the U.S. dollar index, which measures the greenback against a basket of other major currencies, declining by 0.1%.
Weak Domestic Data
AdThe currency's gains came despite a report from South Africa's national statistics agency showing a significant decline in industrial activity. Key figures include:
- Manufacturing output fell by 4.3% year-on-year in May.
- This marked an acceleration from the 2.9% year-on-year decline recorded in April.
The weaker-than-expected data highlights ongoing headwinds for the domestic economy, but on Thursday, these concerns were outweighed by the positive momentum from commodity markets.
Equity Market Gains
Positive sentiment was also evident on the Johannesburg Stock Exchange, where the Top-40 index closed 1.1% higher. Gains in the index were supported by mining stocks, which rose in line with higher commodity prices.