JOHANNESBURG (Reuters) -The South African rand strengthened on Tuesday, riding on a better than expected growth of the economy in the first quarter, while a surprisingly large rate hike in Australia heightened global investor caution.
South Africa’s economy recovered to the level it was before the COVID-19 pandemic thanks to a strong performance by sectors like manufacturing, data from the statistics agency showed.
At 1551 GMT, the rand traded at 15.3700 against the dollar, around 0.45% stronger than its previous close. Early in the day, the rand had weakened as much as 0.7% against the dollar.
Gross domestic product grew 1.9% in the first quarter in quarter-on-quarter seasonally adjusted terms and by 3.0% year-on-year unadjusted in the first three months of the year.
Analysts polled by Reuters had predicted 1.2% quarter-on-quarter growth and a 1.7% year-on-year expansion.
“In light of the better-than-expected first-quarter growth, we expect the economy to expand by around 2% this year,” Nedbank economists said in a research note.
But it cautioned that inflation was set to breach the central bank’s target range in the next few months due to high food and fuel prices.
South Africa’s economic recovery from the COVID pandemic has been uneven, and with unemployment close to record highs the government is under pressure to achieve higher rates of growth.
The Reserve Bank of Australia had earlier on Tuesday raised interest rates by the most in 22 years, stunning markets in the lead-up to U.S. inflation data and central bank meetings in Europe and the United States.
Stocks on the Johannesburg Stock Exchange (JSE) fell, even as world shares wavered with Wall Street stocks rebounding and European equity markets trimming losses in the afternoon.
The Johannesburg All-Share index fell 1.13% to 70,318 points while the Top-40 index closed 1.24% lower at 63,734 points.
The government’s benchmark 2030 bond fell, with the yield rising 7 basis points to 9.965%.
(Reporting by Alexander Winning in Johannesburg and Bhargav Acharya in Bengaluru; editing by Uttaresh.V)
