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The rand strengthens slightly on positive economic growth data

by , 27 August 2014

Yesterday, the local currency strengthened very slightly against the dollar. This follows the release of local economic growth data covering the second quarter of the year.

But the rand has been trading in a tight range. What could be in store for the currency?

Let's take a closer look…

The rand pulled back before the release of GDP figures

On Monday, the rand weakened slightly in anticipation of the release of the country’s economic growth figures, says iAfrica. A stronger dollar wasn’t helping the local currency either.

A local trader said the market is still getting over the “recent downgrades of the major local banks,” adds iAfrica. The markets were also cautious about what lay in store with worries about South Africa entering a recession.

Yesterday morning, Stats SA revealed that the South African economy had managed to grow slightly over the three months to the end of June. In contrast to a 0.6% contraction in the first quarter, the economy grew 0.6% over the second quarter.

The news helped the rand strengthen marginally, clawing back 0.36% against the dollar, says Fin24.

This was in spite of the data showing that mining and manufacturing were struggling to grow, especially with strike action affecting both sectors.

The rand and other emerging markets are looking more favourable

Sean McCalgan, a market analyst with ETM, says there was a “general risk-on tone across global markets,” says BDLive. This as speculation starts to grow that the “European Central Bank will start to focus more on the framework of quantitative easing (QE)”. This is good news for riskier assets, like the rand, in the short-term.

At time of writing, the rand was trading at 10.69 to the dollar, 14.09 to the euro and 17.70 to the pound.

So the rand continues to struggle to build momentum against a stronger dollar.

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The rand strengthens slightly on positive economic growth data
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