Rand rolling af­ter reel­ing

China’s GDP boosts rise

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

THE RAND yes­ter­day hit a twoweek high against the dol­lar, sup­ported by bet­ter than ex­pected sec­ond quar­ter gross do­mes­tic prod­uct (GDP) num­bers in China.

The lo­cal unit breached the R13 psy­cho­log­i­cal bar­rier against the dol­lar as the green­back con­tin­ued to nurse losses af­ter last week’s un­der­whelm­ing in­fla­tion and re­tail sales data from the US.

The rand strength­ened more than 1 per­cent to R12.9238 against the dol­lar at 5pm from Fri­day’s R13.03, while it firmed to R16.84 against the pound and rose to R14.81 against the euro.

The rand’s re­cent bullish run marks a sharp turn­around for the unit, which last week hit a high of R13.61 to the dol­lar as it strug­gled to shrug off the hang­over from the ANC’s pol­icy con­fer­ence and the sug­gested na­tion­al­i­sa­tion of the Re­serve Bank. But on Wed­nes­day, the rand ex­hib­ited signs of life af­ter the US Fed­eral Re­serve adopted a dovish tone to its mon­e­tary pol­icy.

It strength­ened fur­ther on Fri­day as US in­fla­tion num­bers fell out­side the Fed’s tar­get ranges and re­tail sales fell for a sec­ond con­sec­u­tive month in June.

Al­let Op­per­man, an an­a­lyst at Trea­suryOne, said mo­men­tum was on the rand’s side fol­low­ing in­ter­na­tional de­vel­op­ments and lo­cal moves to sta­bilise the ail­ing state-owned en­ter­prises.

Op­per­man noted that the rand was also boosted by the news that Dudu Myeni would not serve an­other term as the chair of the be­lea­guered SA Air­ways.

“The weak­ness of the dol­lar has helped risky cur­ren­cies in the short term as the bad in­fla­tion num­ber will cause some jit­ters within the Fed, as a hike in De­cem­ber is be­com­ing less likely,” Op­per­man said.

“News out of the Fed will be watched closely as they are the main movers of the mar­ket at this stage in the US.”

News that China, the world’s sec­ond largest econ­omy and a key driver for emerg­ing mar­kets’ growth, had over-per­formed boosted sen­ti­ment in in­ter­na­tional mar­kets on global growth prospects dur­ing the sec­ond quar­ter.

China also re­in­forced re­cov­er­ies for com­mod­ity ex­porters. The Na­tional Bureau of Sta­tis­tics of China said the Chi­nese econ­omy grew at 6.9 per­cent year-on-year in the sec­ond quar­ter, beat­ing the tar­get of 6.5 per­cent tar­get set by the govern­ment.

In May, Moody’s down­graded China’s credit rat­ing for the first time in nearly three decades on con­cerns over its debt.

Last month, the World Bank fore­cast that global eco­nomic growth will strengthen to 2.7 per­cent in 2017 as a pickup in man­u­fac­tur­ing and trade, ris­ing mar­ket con­fi­dence and sta­bil­is­ing com­mod­ity prices al­low growth to re­sume in the com­mod­ity-ex­port­ing emerg­ing mar­ket and de­vel­op­ing economies.

The bank fur­ther said growth in emerg­ing mar­kets and de­vel­op­ing economies would pick up to 4.1 per­cent this year from 3.5 per­cent in 2016.

Tif­fany Pol­lock, an an­a­lyst at Mer­chant West, said the rand had re­gained its ap­peal.

“Tech­ni­cally, the rand has been get­ting sup­port from mo­men­tum in­di­ca­tors which showed it was stray­ing into over­sold ter­ri­tory last week, while bets on a mod­est Fed­eral Re­serve rate hike path have helped to re­tain its yield ap­peal,” Pol­lock said.

The pos­i­tive Chi­nese data also helped re­sources stocks on the lo­cal bourse inch higher. Global re­sources miner and trader Glen­core was up 0.52 per­cent to R54.24, while Gold Fields was up 0.82 per­cent to R49.42, and Lon­min rose 14.82 per­cent to R12.86 fol­low­ing the re­lease of an im­proved quar­terly pro­duc­tion re­port.

An­a­lysts from Mo­men­tum SP Reid said the rand and South African eq­ui­ties were ex­pected to con­tinue their im­prove­ment in the short term.

“The rand con­tin­ues to ex­hibit short-term tech­ni­cal im­prove­ment aided by the loss of trac­tion in the green­back,” the an­a­lysts said.

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