South Africa’s rand extends rally to 3-week high after GDP boost

Madiha Shakeel September 4, 2019

JOHANNESBURG: South Africa’s rand rose to a three-week high early on Wednesday following a better-than-expected jump in second quarter economic growth, brushing off concerns over anti-immigrant protests locally and the ongoing U.S.-China trade dispute.

At 0640 GMT the rand was 0.61% firmer at 14.9975 per dollar, its firmest level since Aug. 8, continuing the previous session’s rally that saw the currency open at 15.2725 before the GDP data set the bids alight.

Gross domestic product in the three months to June expanded by 3.1%, after a 3.1% contraction in the first quarter. Economists polled by Reuters had predicted an expansion of 2.4% for the quarter.

The positive growth data helped soothe sentiment battered by recent signs of weak activity and concerns that an additional 59 billion rand ($3.9 billion) for state power firm Eskom had made a credit downgrade a near-certainty.

Riots and looting in Johannesburg and the capital Pretoria targeting foreign-owned businesses that began on the weekend and intensified on Monday and Tuesday have, however, dampened the cheer.

A clutch of African leaders threatened diplomatic retaliation, with Nigerian President Muhammadu Buhari saying he was urgently sending a special envoy to meet with President Cyril Ramaphosa to discuss the violence.

South African police on Tuesday they had arrested well over 80 people and confirmed five deaths.

Bonds also firmed, with the yield of the benchmark paper due in 2026 down 2.5 basis points to 8.125%.

In equities food producer Libstar said normalised earnings rose 12.4% in the first half, helped by a strong performance in its core businesses.

Copyright Reuters, 2019

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