The Pound (GBP) to South African Rand (ZAR) exchange rate was mixed on Thursday after economic data out of Africa’s most advanced economy showed weakness in the mining and manufacturing sectors.
Earlier in the session, the Rand had been trading higher against the Pound and US Dollar as it and other emerging market assets found support from the release of surprisingly dovish Federal Reserve Minutes on Wednesday evening.
As the session progressed, the Rand softened as the latest data produced by Statistics South Africa showed that output in South Africa’s mining sector fell by 10.1% year on year in August. The drop was sharper than the -6.2% decline forecast by economists. On a month on month basis production fell by -3.1% a reversal from the revised 1.6% increase recorded in July.
Platinum group metals decreased by 45% and were a significant negative contributor (-11.6 percentage points) to the 10.1% decrease.
Following the release of the data, the Rand softened against most of its major peers.
Separate data showed that manufacturing production fell less than expected in August as it contracted by 1.2% year on year from a revised 1.8% contraction recorded in the preceding month. On a month on month basis, factory production increased by 2.2% but declined by 1.4% in the three months leading to August.
Economists had been expecting a 3.2% yearly contraction and a monthly rise of 0.4%.
Despite the soft data, the Rand was able to hold onto ground as economists continued to favour over currencies over the US Dollar.
The Fed minutes caused the market to ease its bets that an interest rate rise will occur in the world’s largest economy any time soon.
Sterling came under pressure after the Bank of England left interest rates at the record low level of 0.5% and as concerns over the weakening Eurozones impact on the UK economy increased. The weakness in Europe is lending support to BoE
Governor Mark Carney’s argument that more time is needed to shore up the recovery before a rate hike will be viable.
‘The deterioration in Europe will be on their radar. Any further softening in the data may be a final nail in the coffin for any speculation, including our own, of a November rate hike,’ said Victoria Clarke, an economist at Investec Securities.
Sterling could soften further on Friday of the latest Balance of Trade report comes in weakly because of the weakness in the Eurozone.
South African Rand (ZAR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,South African Rand,17.8342 ,
Euro,,South African Rand,14.0394 ,
US Dollar,,South African Rand,11.0334 ,
Australian Dollar,,South African Rand,9.7412 ,
[/table]
