South Africa’s rand rallied to its best level in six-weeks on Thursday, shaking off sluggish manufacturing data as global demand for high-yielding currencies was lifted by growing bets that lending rates in the United States will remain low.
At 1500 GMT the rand was 0.48% firmer at R14.50 per dollar, its strongest level since February 24 and poised to reach a one-year high as the bullish case gathered momentum.
The much-anticipated minutes of the Federal Reserve’s March policy meeting, released on Wednesday, showed the bank’s officials were still cautious about the risks of the pandemic and committed to providing monetary policy support.
Lower rates and continued liquidity provision in the world’s largest economy, which recorded a surprise increase in new claims for unemployment benefits, typically leaves investors with funds to plough into riskier assets like the rand that offer juicer returns.
Bonds also rallied, with the yield on the benchmark government bond due in 2030 down 11 basis points to 9.22%.
Equities fell after local manufacturing output contracted 2.1% year on year in February, more than expected.
“This once again highlights the underlying weakness in the economy and continues to point towards a very soft start to the year,” Pieter du Preez a senior economist at NKC African Economics said in a note.
“Although we expect the sector to show some sort of recovery over the coming months, it still faces significant obstacles over the short term.”
The Johannesburg All-Share index closed 0.16% lower at 67,053 points, while the Top 40 index fell 0.17% to 61,303 points.
Grocery retailer Pick n Pay fell 0.60% after it flagged an up to 25% drop in annual headline earnings per share due to Covid-19 lockdown restrictions and extra costs.