South Africa’s rand recovered on Wednesday after a sharp fall in the previous session when data showed the economy contracted by the most on record in the second quarter.
At 1500 GMT, the rand was 1.85% firmer at R16.61 per dollar, after slumping more than 1% on Tuesday when a plunge in gross domestic product rattled already fragile investor sentiment.
“Despite all of this negativity, the rand is standing tall against the dollar and other G10 currencies today,” said Lukman Otunuga, senior research analyst at FXTM.
“The rand remains influenced by external drivers in the form of Covid-19 developments, US-China trade and global sentiment. If the rand can keep up this positive momentum, prices may test R16.50 in the near term.”
Africa’s most advanced economy shrank 51% in the second quarter due to the coronavirus restrictions, its fourth consecutive quarterly contraction, data showed on Tuesday.
On Wednesday, a survey showed that South Africa’s business confidence recovered from an all-time low in the third quarter of the year as coronavirus-led curbs were largely lifted, but consumer sentiment remained heavily depressed.
This helped buoy stocks, with the Johannesburg Stock Exchange’s All-Share Index seeing its biggest daily rise since August 4 in terms of points. It ended the day 1.42% higher, at 55,211 points. The blue-chip Top 40 index gained 1.31% to 50,838 points.
Companies that benefit from a strong economy, namely banks and retailers, led the blue-chip index higher, with retailer Shoprite the biggest gainer.
It rose more than 10%, followed closely by three of South Africa’s major banks – Standard Bank, Nedbank and Absa – which closed up 9%, 8.9% and 8.2% respectively.
Bonds were weaker, with the yield on the benchmark 2030 government paper up 2 basis points to 9.275%.