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USD/ZAR Fluctuates As South African Manufacturing Slumps

Published: 7 Nov at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Canadian Dollar, USA, Canada, South Africa,

Prior to the publication of South African manufacturing data the Rand was fluctuating against the US Dollar. Anticipation surrounding the European Central Bank’s rate decision also wore on the commodity-driven Rand as the local session progressed.

Before the day’s major news was published, market researcher Theuns de Wet asserted; ‘Today’s data releases and news flow could have significant consequences for the Rand. [If USD GDP data] surprises on the high side of expectations and the ECB hints at further policy easing, the Dollar could find renewed support and the Rand could weaken along with it.’

After South Africa’s manufacturing report was published the Rand continued to struggle against its US counterpart, remaining firmly above the psychological 10 Rand per Dollar level.

Manufacturing output plummeted by 3.3 per cent in September, year-on-year, following growth of 0.2 per cent the previous month.

This was the worst rate of decline for a year and a half and the development prompted this response from 4Cast analysts; ‘We cautious to expect larger improvements in the pace of growth by the end of the year as the mid-term outlook remains clouded by the persistent industrial action.’

As the Rand tracks the Euro, South Africa’s currency was also adversely affected by the European Central Bank’s shock decision to cut the main refinancing rate to a fresh record low of 0.25 per cent.

The unexpected action led to widespread Euro declines and weighed on the Rand.

Further weakness in the Rand/US Dollar pairing occurred as a result of stronger-than-anticipated US growth data. The US economy grew by 2.8 per cent in the third quarter, year-on-year, rather than the 2.0 per cent expansion expected.

As the surprisingly strong result inspired speculation surrounding the prospect of the Federal Reserve tapering stimulus before next spring the US Dollar was bolstered against its peers. However, ‘Greenback’ gains were limited ahead of tomorrow’s highly influential US non-farm payrolls report.

In other currency news, the Canadian Dollar softened against its US counterpart ahead of tomorrow's domestic employment report. Economists are expecting the data to show that the rate of Canadian jobs growth slowed last month.

The Pound was little changed against its main rivals as the Bank of England opted to hold rates and the level of asset purchases at previous levels, although the British asset did surge to a nine-month high against a broadly softening Euro.
As of Thursday, 7th November 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1998, GBP USD exchange rate was 1.6088, GBP CAD exchange rate was 1.6817, and GBP ZAR exchange rate was 16.5411.
Patrick James About Author: (289 Posts)Patrick completed his economics degree just as the global financial crisis struck in 2008. In the intervening years Patrick has made his mark, climbing to a prominent position within a large financial services provider. As part of his role Patrick uses his expertise to advise companies of the best ways to safeguard against currency risk.

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