JOHANNESBURG: South Africa's rand sunk to a session low against the dollar on Thursday after the dollar strengthened and April factory output unexpectedly contracted before paring losses.
At 1510 GMT the rand had weakened 0.33 percent to 12.3800 , pulling back from a sharp fall to 12.4900 after manufacturing contracted 2 percent y/y in April.
The dollar index, a measure of the greenback against major currencies, rose over half a percent as the unit was buoyed by a surge in US retail sales.
A Reuters poll had predicted factory output would expand 1.4 percent, the surprise decline temporarily pushing the rand toward the 12.50 in a session traders said lacked clear drivers.
"It's not so much to do with the manufacturing numbers, its the stronger US dollar that's causing rand weakness," said trader Marten Banninga of World Wide Capital Securities.
Government bonds were range bound, firming slightly on the day by 3 basis points to 8.345 percent.
Investors were holding their bets ahead Standard and Poor's credit rating update on South Africa due on Friday, some traders said, with a downgrade an unlikely outcome.
"The expectation is for S&P to maintain its current BBB- rating," said Mohammed Nalla, global markets research head at Nedbank, in a note. "The stable outlook by S&P may delay a move toward sub-investment grade," Nalla said.
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