JOHANNESBURG: South Africa's rand firmed against a weaker dollar on Wednesday, shaking off data revealing the economy was already in contraction before the coronavirus lockdown as investors looked to pocket the rand's high yield.
The dollar slipped on Wednesday, with the market having a modest appetite for risk-taking amid generally upbeat US data and improving European economic numbers.
At 1503 GMT the rand was 1.71% firmer at 17.0550 per dollar, having hit a three-session low on Tuesday after economic data showed gross domestic product had contracted for a third consecutive quarter in the first three months of the year.
The JSE All Share index was down 1.01% at 53,813 points and the top 40 companies index was 1.2% lower at 49,570 points.
Bond prices firmed, with the yield on the benchmark 2030 issue down 3.5 basis points at 9.235%.
"The deepening of the recession is set and thus priced into the ZAR exchange rate," said Elisabeth Andreae of German bank Commerzbank.
"However, markets are likely to be interested above all in how quickly the economy will come out of the trough - in particular in comparison to others. This is likely to be above all a question of time and (financial) resources."
Local purchasing managers' index (PMI) data showed on Wednesday that manufacturing activity expanded in June as an easing of coronavirus restrictions lifted business activity and sales.
Stocks fell as rising COVID-19 cases and the deepening of South Africa's recession weighed on sentiment.
"There is a concern with what is happening on our local market regarding the spike in COVID-19 cases and also with the GDP numbers coming out," said Ferdi Heyneke, a stock broker for Afrifocus Securities.
South Africa has confirmed more than 151,000 cases with over 2,600 deaths.
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