Rand hits best level in weeks after surprising growth number

(File)
(File)

The rand strengthened to its best level in more than two weeks following the news that the South African economy grew by 3.1% in the second quarter.

Economists expected growth of around 2.5%.

Read: SA economic growth surprises, recession avoided

By early afternoon, the rand was trading at R15.13, almost a percent stronger than on Monday. It strengthened by more than a percent against the pound (R18.19) and euro (R16.56).

Schalk Louw, a wealth manager at PSG Old Oak, said a break below R15.15/$ could see the rand test levels around R14.60 again.

The rand was one of the best performing emerging market currencies on the day. The Indian rupee hit a nine-month low after news of the country’s weakest quarterly economic growth number since 2013. GDP grew by 5% in the three months to June, compared to growth of 8% in the same period last year.

Cautious outlook

While there was widespread relief that South Africa avoided a recession, commentators remained cautious.

“Today’s GDP data release is a step in the right direction, but the stop-start pattern of growth that we have become accustomed to means expectations will remain tempered. Base effects and reasonable growth outside of SA have carried us for the moment, but sustained growth relies on overcoming the structural challenges that hamper productivity and economic development.” Said Reza Hendrickse, Portfolio Manager at PPS Investments

“ Finance Minister Tito Mboweni’s recent economic reform document tries to address some of this, while at the same time engineering the economy towards a 2% to 3% growth rate and creating 1 million jobs. In principle it is ambitious, but the initial resistance to it, both within the ANC and from its alliance partners does not inspire confidence.

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