Rand Recovery short-lived?

The rand was an outperformer of the general EM currency bias for a second session yesterday, despite global risk appetite not being all that strong. Helping to generate this strong relative performance were the results of the SA Q4 GDP data which revealed growth of 3.8% q/q annualised from a prior 0.7%. The data appeared to be leaked ahead of the official release time and we thus saw the local unit rallying into the result. Such a reading could spark some speculation that there is indeed room for the SARB to raise rates further if necessary in coming months. Taking a closer look at the GDP data, however, one should note much of the Q4 rebound was attributable to mining and manufacturing sector q/q growth of 15.7% and 12.4% respectively. This growth reflects a normalisation off a very weak Q3 base and it is not expected to be maintained into 2014, especially when considering that external demand remains soft and labour unrest has persisted. With the view that growth is set to slow again in the first half of 2014, we would not be inclined to say the GDP result changes much on the interest rate front thus the rand’s short-term out-performance should be considered with scepticism.

According to Reuters data (bid chart), the ZAR finished stronger vs. the USD on Tuesday, closing at R10.6780 from R10.7400 on Monday. The ZAR strengthened against the EUR, ending at R14.6758 from R14.7558 on Monday, while similarly gaining vs. the GBP at R17.8088 from R17.8952 the previous day.

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