The rand has broken below R15 to the dollar, following better-than-expected GDP data for the second quarter, and weaker US manufacturing data, which softened the greenback.
By 10h20 on Wednesday (4 September), the currency traded at R14.93 to the dollar, down from R15.24 at the start of September.
The stronger move by the rand follows stronger GDP figures for the second quarter of 2019 and this was sustained through overnight trade, said treasury partner at Peregrine Treasury Solutions, Bianca Botes, who added that US manufacturing data surprised to the downside, causing the dollar to slip.
GDP growth of 3.1% was driven by a recovery in the mining sector, up 14.4%, followed by the finance sector (+4.1%), trade (+3.9%) and government (+3.4%).
The finance sector, which include real estate and business services, is the largest industry in the South African economy, and is currently being driven by the banking and insurance sectors, Stats SA said.
The growth in GDP canceled out a 3.1% contraction in the first quarter, due to a power crisis brought on by Eskom’s load shedding.
The GDP data was much higher than expected, with economists polled by Reuters predicting an expansion of 2.4% for the quarter.
Positive sentiment has however, been marred by xenophobic attacks. The violence erupted last week after a South African taxi driver was allegedly shot dead by a suspected Nigerian drug dealer in the capital, Pretoria, and saw scores of foreign-owned shops being looted and torched. The attacks spread to Johannesburg, the economic hub, this week and more than 50 shops and several vehicles were destroyed.
This has sparked negative reaction from other African nations and soured sentiment towards the country, Bloomberg reported.
Moussa Faki Mahamat, the chairman of the African Union, and officials from Nigeria and Zambia expressed outrage at the attacks, which erupted days before the African edition of the World Economic Forum in Cape Town on Wednesday. Nigerian President Muhammadu Buhari will send a “special envoy” to South Africa for talks with president Cyril Ramaphosa.
The presidents of Rwanda, Democratic Republic of Congo and Malawi, meanwhile, have decided not to attend the World Economic Forum on Africa hosted by South Africa, as a result of the riots.
Police have reportedly arrested over 80 people and confirmed five deaths.
The rand is currently trading at the following levels against the major currencies:
- ZAR / USD: 14.93 (1.12%)
- ZAR / GBP: 18.15 (0.52%)
- ZAR / EUR: 16.42 (1.00%)