South Africa’s rand firms in line with emerging markets and stocks

The South African rand firmed on Tuesday, in line with other emerging market currencies and rise in stocks, as investors’ appetite for riskier assets was boosted by better-than-expected manufacturing data and a pause in a dollar rally.

The rand ZAR=D3 was trading at 14.3300 per dollar by 1540 GMT, 0.35% firmer than its New York close of 14.143800. The currency touched an intraday low of 14.2500.

“It has been a relatively soft day for the dollar, that seems to have providing a bit of a respite for emerging markets. The rand was trading on the defensive earlier on, but volatility has pulled back a little bit,” said ETM economist Halen Bothma.

“A combination of factors like better numbers on mining and manufacturing numbers had a positive impact on the margin but they don’t really change the growth outlook. There are lot of homegrown risks facing the rand, specifically on the fiscal side, which is keeping investors on the cautious side.”

South Africa’s manufacturing output rose more than expected in October to its highest level since June 2016, data showed on Tuesday, lifting the rand as the economy showed further signs of recovery.

Africa’s most industrialised economy slipped into recession after contractions in the first two quarters of the year, but bounced back strongly in the third as the manufacturing, agriculture and retail sectors grew.

Beijing’s Commerce Ministry said Vice Premier Liu He had discussed the road map for the next stage of talks with senior U.S officials on Tuesday. That steadied global markets, after nerves over global growth, the trade conflict and political risks like Brexit sparked a broad sell-off.

Bonds were flat, with the yield on the benchmark bond due in 2026 at 9.165%.

In equities, the All Share index climbed 1.49% to 51,188 points while the Top 40 index rose 1.84% to 45,234 points.

Bourse heavyweight Naspers was 3.68% higher at R2,850 and banks were 0.72% firmer.

“There seems to be a bit of bargain-buying coming into the market but there is still a lot of uncertainty affecting the markets,” said Ferdi Heyneke, portfolio manager at Afrifocus Securities.