The South African rand made significant gains versus the U.S. dollar today after risk sentiment picked up in the markets following a better than expected China PMI data today which helped eased concern the global economy is losing momentum.
The rand appreciated by over 1 percent against the dollar, as USDZAR fell to a low of 7.14 by 11:00 GMT from a high of 7.23 in Monday’s U.S. trading session.
Chinese flash manufacturing PMI data released today was a preliminary gauge which indicated that manufacturing in the world’s second largest economy is still growing and beat forecasts by contracting less than had been predicted.
China is a major trading partner for South Africa and is the largest buyer of South African raw materials including iron ore and coal, so this was good news for the commodity rich African nation.
The data drove commodity prices up and boosted South Africa’s benchmark stock index for a third day, led by mining companies including BHP Billiton Ltd.
Out of all the emerging market economies, South Africa is the most affected by Chinese growth prospects.
The rand was also boosted by speculation that the U.S. Federal Reserve will introduce more quantitative easing and a third round of stimulus