South Africa’s rand raced to a six-week best on Thursday as another batch of data showing poor economic activity was offset by the benign monetary policy outlook in the United States after the Federal Reserve kept lending rates flat.
At 1515 GMT the rand was 1% stronger at 14.52 per dollar, its firmest level since October 28, bringing gains since the previous session to 1.7% in a relief rally sparked on Wednesday by the easing of nationwide blackouts.
On Wednesday, President Cyril Ramaphosa said state utility Eskom would stabilise the national power grid by the end of March, and despite the utility entering an eighth straight day of power cuts on Thursday, sentiment was soothed by the shorter duration of cuts.
Economic data out on Thursday did not help. Mining output fell 2.9% year-on-year in October, while producer price inflation slowed to a 2.3% year-on-year increase in November from 3%, indicating depressed levels of activity and buying.
A poll of analysts by Reuters now puts 2019 GDP at 0.4%, with a 40% chance the country has sunk into recession.
But the US central bank’s decision on Wednesday to keep rates steady, with chair Jerome Powell saying a significant, persistent inflation rise would be needed to hike rates, buoyed risk assets and the rand as the carry trade remained attractive.
On the bourse, stocks ticked up alongside emerging market shares as the prospect of an accommodating US Federal Reserve policy pushed money into equities and undercut the dollar.
Shares traded flat in the afternoon session, with the benchmark JSE Top-40 Index up 0.13% to 49 603.06 points while the broader All-Share Index rose 0.1% to 55 824.08 points.
Gold miners topped the bourse despite data indicating that mining output had fallen 2.9% year-on-year. Gold Fields was up 2.09% to R89.71 while Sibanye-Stillwater was up 1.15% to R34.39.
“I think the mining figures weren’t that big of a surprise. If you think about it GDP data came out a while back. We already knew that our mining was a bit slower, our production is a bit slower, and we all know that it’s due to Eskom,” said Alisha Coetzee, analyst at FFO Securities.
In fixed income, the yield on the benchmark government bond due in 2026 was down 1.5 basis points to 8.375%.