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Rand extends rally to 3-week high after GDP boost

Economic growth offset recent signs of weak activity.
The rand gains on the back of positive GDP data even as anti-immigrant riots escalate across Gauteng. Picture: Shutterstock

South Africa’s rand rose to a three-week high early on Wednesday following a better-than-expected jump in second quarter economic growth, brushing off concerns over anti-immigrant protests locally and the ongoing US-China trade dispute.

At 0640 GMT the rand was 0.61% firmer at 14.99 per dollar, its firmest level since August 8, continuing the previous session’s rally that saw the currency open at 15.27 before the GDP data set the bids alight.

Gross domestic product in the three months to June expanded by 3.1%, after a 3.1% contraction in the first quarter. Economists polled by Reuters had predicted an expansion of 2.4% for the quarter.

Read: GDP growth is great but doesn’t signal a recovery

The positive growth data helped soothe sentiment battered by recent signs of weak activity and concerns that an additional R59 billion ($3.9 billion) for state power firm Eskom had made a credit downgrade a near-certainty.

Riots and looting in Johannesburg and the capital Pretoria targeting foreign-owned businesses that began on the weekend and intensified on Monday and Tuesday have, however, dampened the cheer.

A clutch of African leaders threatened diplomatic retaliation, with Nigerian President Muhammadu Buhari saying he was urgently sending a special envoy to meet with President Cyril Ramaphosa to discuss the violence.

Read: Xenophobic attacks leave migrants living in fear

South African police on Tuesday they had arrested well over 80 people and confirmed five deaths.

Bonds also firmed, with the yield of the benchmark paper due in 2026 down 2.5 basis points to 8.125%.

In equities food producer Libstar said normalised earnings rose 12.4% in the first half, helped by a strong performance in its core businesses. 

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