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Rand gains on strong production data

Johannesburg - The rand gained in midday trade on Thursday as strong February eurozone industrial production (IP) boosted the euro.

"We gained from the euro's move, which reflected better-than-expected industrial production data. That followed yesterday's better-than-expected local manufacturing data, which also boosted the rand," a local trader said.

At noon local time, the rand was bid at R7.9562 to the dollar from its previous close of R7.9807. It was bid at R10.4300 to the euro from R10.4642 before, and at R12.6677 against sterling from R12.6955 previously.

The euro was bid at $1.3118 from its previous close of $1.3117.

Dow Jones Newswires reported that industrial production in the 17 countries that use the euro showed an unexpected seven-month high monthly increase due to gains in just six regions, the strongest being a 13.0% monthly increase in the Netherlands.

Energy production also soared in February, by 7.7% compared with January.

Industrial production rose 0.5% on the month in February and fell by 1.8% on the year. The monthly increase was the strongest since August last year while the annual drop was the steepest since December 2009.

The data were mixed when compared with expectations. Economists had forecast a 0.2% monthly decline and a 1.7% year-on-year (y/y) fall, according to a survey by Dow Jones Newswires last week.

Eurostat also revised its monthly estimate for January to show monthly production was flat, and a decline of 1.7% on the year. Eurostat originally estimated that industrial production rose 0.2% on the month and was 1.2% lower on the year in January.

The February SA manufacturing production volume index rose by 4.1% y/y after a 2.3% y/y increase in January and a 2.6% gain in 2011.

Standard Bank said in its reaction to the manufacturing data that while the data did not directly impact on the local currency, the stronger print had positive implications for gross domestic product growth.

"This could spark a renewed interest in equity portfolio flows, which have only recently turned to inflows, and thus see the local unit strengthen.

"Despite the positive data, we believe that the rand is likely to remain on the back foot in the short to medium term due to lingering concerns over Europe with a particular focus on developments in Spain," the bank said.

The euro gained against the dollar and yen during Asian trading on Thursday on improved risk appetite after the release of strong Australian jobs data, although concerns over the eurozone's fiscal health and China's slowing economy were likely to continue pressuring the common currency.

The Australian Bureau of Statistics said earlier that the nation's unemployment rate in March was steady at 5.2% from February, and that the number of employed rose to 44 000, a figure much larger than the forecast 6 000.
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18.94
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Rand - Pound
24.10
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