The Pound (GBP) softened against the South African Rand (ZAR), Australian Dollar (AUD) and other commodity and emerging market currencies on Tuesday after better than forecast economic data out of China increased demand.
The South African Rand made gains against the Pound and US Dollar after it received support from better-than-forecast manufacturing production data out of China. The ‘Greenback’ eased as investors slowed down their buying of the currency and embarked on a round of profit taking in order to take advantage of its recent rally.
A slight rise in China’s manufacturing index caused currencies ranging from the Australian Dollar to South African Rand to rise against their peers. HSBC’s flash manufacturing purchasing managers’ index (PMI) rose to 50.5 in September from a final reading of 50.2 in August.
The better than expected data countered some of the risk aversion created on Monday after China’s finance minister said that more stimulus measures would not be introduced for the time being.
‘It was a risk-off day yesterday as the Chinese finance minister ruled out further stimulus/policy shifts in response to one economic number. Given that that message was delivered in an otherwise quiet session it garnered far more weight than it should,’ said Annette Beacher, head of Asia-Pacific research at TD Securities
The Rand also received support from the South African Reserve Bank’s (SARB) latest monthly leading business cycle indicator which increased by 0.3% on a month on month basis in July. The rise was a result of an increase in activity in the nation’s manufacturing sector. The rise marks the third consecutive monthly increase.
The SARB indicator collates data such as vehicle sales, job advertisements, business confidence and money supply to gauge the economic outlook.
The Australian Dollar also found support from the Chinese data and took advantage of a report, which showed that UK public sector borrowing exceeded forecasts. The Office for National Statistics reported that public sector net borrowing, excluding public sector banks, was £11.6 billion in August 2014, an increase of £700 million compared with August 2013.
Pound Sterling to South African Rand Exchange Rate Forecast
The Rand’s rally could be short-lived with domestic economic weakness and uncertainty about global interest rates piling pressure on the local currency, experts say.
Further losses against the Rand are expected to be short-lived due to increased risk aversion because of the escalating conflict against the Islamic State.
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,18.1928 ,
Euro,,South African Rand,14.3069 ,
US Dollar,,South African Rand,11.0918 ,
Australian Dollar,,South African Rand,9.8834 ,
[/table]
