S.African rand edges lower after 2% drop on poor PMI data, U.S. downgrade

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S.African rand edges lower after 2% drop on poor PMI data, U.S. downgrade

10:21 CAT | 02 Aug 2023

File photo: Reuters

The South African rand edged lower in early trade on Wednesday, after tumbling as much as 2% on Tuesday, as risk-off sentiment increased on concerns about global economic growth and a credit rating agency downgraded the U.S.

At 0614 GMT, the rand traded at 18.3475 against the dollar ZAR=D3, about 0.2% weaker than its previous close.

The dollar =USD last traded at 102.20, around 0.2% stronger against a basket of global currencies, recovering some losses it incurred after rating agency Fitch in a surprise move downgraded the U.S. to AA+ from AAA.

Economic data this week showed manufacturing activity contracted in the U.S., Germany and China and other nations.

“All (emerging market) currencies came under pressure as global growth concerns resurfaced after a raft of manufacturing PMI numbers around the globe all printed below the 50.0 mark,” said Andre Cilliers, Currency Strategist at TreasuryONE.

“The rand has lost ground this morning as the cut in U.S. credit ratings will spur the market to risk-off.”

South Africa’s benchmark 2030 government bond ZAR2030= was also marginally weaker in early deals, with the yield up 2.5 basis points to 10.355%.

Source: Reuters