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Rand falls as weak GDP data catches market off guard

Jun 05 2018 13:09

Cape Town - The rand lost 0.8% to the dollar in the early afternoon on Tuesday, after Stats SA reported that the SA's quarter-on-quarter GDP had fallen by 2.2%

The local currency was trading at R12.67 to the greenback at 12:36, having lost 12c to the dollar after the announcement of the weak GDP figures was made at about 11:30 in Pretoria. 

The rand had been even in early trade. It opened the day at R12.55/$.  

Stats SA reported that SA’s seasonally adjusted GDP had contracted by 2.2% during the first quarter of 2018, when compared to the fourth quarter of 2017. 

This is the largest quarter-on-quarter decline since 2009. 

While economists had broadly been expected a decrease in GDP growth, the scale of the decrease was above expectations. 

"While the expectation [was] that the GDP number would disappoint (-0.5% quarter-on-quarter) the fact that the GDP number came in so much lower at -2.2% quarter-on-quarter ... caught the market off guard," said Andre Botha, a senior currency dealer at TreasuryONE. 

"This caused the knee-jerk reaction," he said, adding that despite improved sentiment since President Cyril Ramaphosa took office, there was "still a lot of work to be done in order to jump start the economy". 

Bianca Botes, corporate treasury manager at Peregrine Treasury Solution, said : "Muted purchasing manager’s index (PMI) figures, coupled with the contraction in GDP speaks to the difficulties faced by South Africa as an emerging market to create and sustain economic welfare across the board."

"Although we have seen a turnaround in market sentiment since the ousting of Zuma, this sentiment has failed to translate into economic growth thus far."

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stats sa  |  rand  |  sa economy  |  markets  |  gdp  |  currencies
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