Expanding factory output unhinges rand

THE RAND weakened against the dollar and bond yields rose to the highest in a week after a gauge of manufacturing soared to a two-year high, adding to signs of an economic revival.

The currency fell by 6.73c to R7.4783 against the dollar at 5pm yesterday, after gaining more than 12c the day before.

The yield on the nation’s R77 billion worth of 6.75 percent bonds rose to the highest since February 23.

South Africa’s purchasing managers’ index rose to 57.9 points in February, from 53.2 the month before, beating the 52.3 median estimate of economists in a survey. Manufacturing, accounting for 15 percent of gross domestic product, expanded in the last three months of 2011 after contracting in the second and third quarters, lifting economic growth from close to a two-year low.

“It was a lot better than we expected, and that is quite positive” for the rand, Nedbank treasury strategic research head Ian Cruickshanks said.

“Risk appetite is still there, and that is going to continue to buoy emerging-market currencies,” he added.

China’s factory output improved for a third month last month, brightening the outlook for global growth.

“The outlook

for

the Us.economy continues to improve,” ETM Analytics economist George Glynos said.

“Rand resilience may be a feature for a while to come.”