The rand advanced before local business confidence gauges and a European Central Bank policy meeting tomorrow that may signal the likelihood of future economic stimulus.
South Africa’s currency gained as much as 0.3 percent and traded 0.2 percent stronger at 9.2380 per dollar as of 9:56 a.m. in Johannesburg. The rand is still down 8.3 percent this year, the worst performer among emerging-market peers tracked by Bloomberg. Yields on benchmark 10.5 percent bonds due December 2026 fell one basis point, or 0.01 percentage point, to 7.369 percent.
The South Africa Bureau for Economic Research publishes its first-quarter business confidence index at 12 p.m. local time, while the South Africa Chamber of Commerce and Industry releases its March confidence survey at 11:30 a.m. The ECB will keep its benchmark rate unchanged tomorrow, according to 54 of 56 economists surveyed by Bloomberg News.
A significant improvement in business confidence “will be a positive surprise given the weakening state of the domestic economy,” Rand Merchant Bank strategists, including John Cairns in Johannesburg, wrote in a note to clients today. “Local pressure on the unit seems limited” and “the market is already turning its attention” to the ECB meeting tomorrow and U.S. payrolls data on April 5, the strategists said.
The rand weakened 0.7 percent against the dollar yesterday as South Africa’s purchasing managers’ index fell for the first time in three months, showing factory output may have contracted in March.
Manufacturing, which contributes about 15 percent to South Africa’s gross domestic product, has been under pressure from rising electricity tariffs, transportation disruptions due to labor strikes and a slump in demand from the euro-area economy, which buys a third of the country’s exported manufactured goods.
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