Rand strengthens after better-than-expected GDP data

The rand was trading at R11.81/dollar on Tuesday afternoon (6 March), in an immediate response to the announcement that South Africa’s GDP expanded by 3.1% in the fourth quarter of 2017, and by 1.3% for the year as a whole.

Stats SA reported on Tuesday that country’s GDP growth exceeded National Treasury’s expectation of 1.0% growth announced during the National Budget Speech in February last year, and shot far past market expectations which ranged from 0.2% to 0.8%.

The South African economy has been heading in a stronger direction in recent weeks, riding a wave of positive sentiment following the election of Cyril Ramaphosa as the new president. However, some of this sentiment was undone in recent sessions, in the back of uncertainty around South Africa’s land reform policies.

According to Bianca Botes of Peregrine Treasury Solutions, the rand strength in the most recent session has been supported by a weaker US dollar as the White House scrambles on trade policies, as well as positive sentiment roused by Finance Minister Nene’s address at a union meeting in Pretoria on Monday.

“Nene discussed the outcomes of his meeting with credit ratings agency Moody’s and the country’s improved economic outlook,” said Botes.

His key messages were:

  • He will act swiftly and decisively against corruption;
  • The February budget will see GDP growth increase as key policy matters are finalised;
  • GDP growth forecasts are to be revised upwards.

“Nene is market friendly, and these messages were well received in the current risk-off environment.

“We still however feel this move cannot be sustained based on currency market fundamentals and we will continue to look for a move to above R12.00/dollar keeping a close eye on Moody’s later this month,” Botes said.

By 13h45 on Tuesday, the rand was trading stronger at R11.74 to the US dollar, with gains across the other major currencies:

  • Dollar/Rand: R11.74  (+1.25%)
  • Pound/Rand: R16.30  (+0.49%)
  • Euro/Rand: R14.54  (+0.71%)

Read: South Africa’s economy grew more than expected in 2017

Must Read

Partner Content

Show comments

Trending Now

Follow Us

Rand strengthens after better-than-expected GDP data