The South African rand was little changed against the U.S. dollar on Monday as investors awaited a series of economic data releases this week that could provide fresh indications of the health of the country’s economy.
At 6:55 a.m. GMT, the rand traded at 15.9675 to the dollar, broadly unchanged from its previous close. Investors were largely unmoved by newly released data showing an increase in South Africa’s foreign exchange reserves.
The South African Reserve Bank said net foreign reserves rose to $73.69 billion at the end of August, from $71.76 billion in July. Gross reserves also increased during the month.
Market attention is now shifting to second quarter gross domestic product figures due Tuesday. The data will provide an indication of how the economy performed between April and June, a period affected by higher energy costs and weakness in several goods producing sectors.
Economists have generally expected economic growth to have slowed sharply during the second quarter. South Africa’s economy expanded by 0.5% in the first quarter, but higher fuel costs and weak activity in manufacturing, mining and electricity production are expected to have weighed on output.
The current account will be another focus when the Reserve Bank releases balance of payments data on Thursday. The current account surplus widened to 2.4% of GDP in the first quarter, its highest level in nearly five years, but analysts expect it to have narrowed or moved into deficit during the second quarter as imports increased faster than exports.
Investors will also receive July production figures for the mining and manufacturing sectors on Thursday. Manufacturing output fell 1.7% year on year in June, while mining production also remained under pressure, reflecting weakness in several key mineral industries.
The data will be closely watched because mining and manufacturing remain important contributors to South Africa’s export earnings, industrial activity and employment. A sustained recovery in these sectors could provide support for economic growth and the rand, while further weakness could reinforce concerns about the country’s growth outlook.
The currency is also being influenced by global market conditions. The dollar was broadly steady against a basket of major currencies as investors assessed rising expectations for U.S. interest rate increases amid renewed inflation concerns linked to tensions in the Middle East.
South African government bonds also weakened slightly in early trading, with the yield on the benchmark 2035 bond rising one basis point to 8.53%.
The rand’s performance this week is therefore likely to depend on a combination of domestic economic data and global risk sentiment. Stronger than expected GDP and production figures could improve confidence in the South African economy, while weak data may increase pressure on the currency.
For policymakers and investors, the releases will provide a broader assessment of whether South Africa’s economy is gaining momentum or losing ground amid higher energy costs, weak industrial production and an uncertain global economic environment.
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