JOHANNESBURG: South Africa's rand weakened on Thursday, weighed down by poor economic data, after surrendering brief gains made on the back of the European Central Bank's (ECB) decision to expand its stimulus programme.
Stocks also ended slightly lower, with insurer Sanlam topping the decliners' list after it posted a below-average increase in annual profit.
By 1545 GMT the rand was 0.7 percent weaker at 15.2955 to the dollar. The unit briefly touched a three-month high against the euro before reversing sharply, weakening 2.6 percent to 17.1542.
An announcement by the ECB that it would expand its bond-buying programme and slash lending rates lifted the rand to its highest level in 2-1/2 months but the currency soon fell back again.
"ECB President (Mario) Draghi later said he didn't expect to have to cut rates again, possibly marking the end of the ECB's rate-cut cycle," emerging analyst at 4Cast Rajiev Rajkumar said.
South African government bonds held on to their gains, with yields on the benchmark issue due in 2026 shedding 8 basis points to 9.18 percent.
Data released on Thursday showed manufacturing output contracted by 2.5 percent in January, while mining output fell by 4.5 percent year-on-year, further signs of weakness in Africa's most industrialised economy.
Traders said the data had hit sentiment and renewed fears that South Africa's credit status could be downgraded to junk, forcing the central bank to raise interest rates more than it would want.
"The Bank is very conscious that a rating downgrade will result in a selloff on the rand and that will cause more inflation," said Gordon Kerr, a trader at Rand Merchant Bank.
On the corporate front, Sanlam, South Africa's biggest insurer by value, reported a 6 percent increase in full-year profit, well below average growth of 19 percent over the past three years, as consumers battle job losses and high personal debt.
Shares in the company dropped 5.19 percent to 59.32 rand.
Overall, a view that recent strong gains might have pushed some stocks into "oversold" territory also weighed on sentiment, traders said.
The blue chip JSE Top-40 index lost 0.15 percent to 45,548 and the broader All-share index was up 0.1 percent to 51,533.
Trade volumes were slightly below average, with 274 million shares changing hands, compared with a daily average of 296 million.
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