Rand eases as industry, mining contract

Johannesburg - The South African rand weakened against the dollar on Thursday after data showed manufacturing output had slowed beyond expectations.

Manufacturing output for May contracted by 3.7 percent year-on-year, more than double what economists polled by Reuters had predicted.

On a month-to-month basis, factory output slipped for a second consecutive month after contracting 1.9 percent in April.

The rand dropped from a relatively firm overnight close in New York towards the 10.8 mark, before pulling back to trade at 10.7100 per dollar at 17:39 SA time, 0.4 percent weaker.

Total mining output for May was also down, dropping by 6.6 percent year-on-year, in large part due to a major strike in the platinum sector.

“In the run-up to the manufacturing data we already saw the rand under selling pressure.

The response to the data is that selling pressure has become more pronounced,” said Jana van Deventer, an economist at ETM Analytics.

“Investors are becoming increasingly concerned about the domestic growth outlook.”

A work stoppage by over 200,000 workers in the metals sector remains underway, entering its second week.

The strike, led by Numsa, has affected production at major automobile makers including BMW and General Motors.

Construction of two power plants for state electricity utility Eskom has also been disrupted.

In fixed income, local bonds tracked the weaker currency lower.

The yield on the 2015 paper added 1.5 basis to 6.695 percent, while the longer-dated 2026 paper added 2.5 basis points to 8.325 percent. - Reuters