After China’s GDP data failed to live up to the expectations of economists, coming in at 7.7 per cent growth rather than the 8 per cent forecast, metal prices tumbled and the Rand tumbled with them.
At the current exchange rate 1 US Dollar will purchase 9.0553 South African Rand as of 14:20 pm GMT
GDP was down 0.2 per cent from the fourth quarter of 2012 and as China is the biggest buyer of South Africa’s commodity exports, fears of a slowdown in the nation wore on the Rand. Last year over half of South Africa’s exports were commodities like metal.
China’s industrial production figures also disappointed. As one economist observed: ‘The disappointing data shows that [China’s] recovery is much weaker and bumpier than expected, dragged down by soft domestic demand.’
Meanwhile, Johannesburg based currency strategist John Cairns noted: ‘The weakness in Chinese data has hit commodity currencies hard. The weak data will weigh on global risk appetite and keep risky assets under pressure, including the Rand.’
The global economic outlook has been knocked in the last couple of weeks by less-than-impressive US data. With the world’s second largest economy now also underperforming, and Eurozone concerns back in the spotlight, investors are turning to safe-haven assets.
As last week came to a close the Rand was trading in the region of 8.9392 Rand per US Dollar. The currency weakened to 9.1105 in the aftermath of the Chinese data releases.
While global economic developments will continue affecting the Rand in the days ahead, investors will also be looking out for South African retail sales figures, due for release on Wednesday. Economists are expecting retail sales to have declined by 1.4 per cent from January, when they fell by 1.2 per cent.
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